Martin Nichols

Articles et réflexions

  • Lactalis in Canada: Good or Bad News for the Dairy Industry?

    Lactalis in Canada: Good or Bad News for the Dairy Industry?

    In less than a month, Lactalis has made two moves that deserve the attention of Canada’s dairy sector. On July 15, the French giant reached an agreement to acquire Agropur’s fine-cheese business, including the OKA, Monsieur Gustav and L’Extra brands and the plants in Oka and Saint-Hyacinthe. Then, on August 14, Lactalis announced a £988 million deal, about US$1.34 billion, to buy Saputo’s British dairy operations.

    Two different transactions on two continents. But together they illustrate something much bigger: the rise of Lactalis in Canada is part of a global growth strategy, and Canada is clearly one of the markets where the group wants a larger presence.

    So for Canadian dairy farmers, is that good news or bad news?

    Lactalis in Canada: a giant that is actually investing

    It would be too simplistic to describe Lactalis as a foreign company merely taking Canadian market share. The group already has a substantial industrial presence in this country.

    According to Lactalis Canada, the company operates 19 manufacturing sites in Canada, employs about 4,500 people and processes roughly 2.2 billion litres of 100% Canadian milk. Since 2018, it also says it has invested more than $900 million in capital projects and transformation initiatives in Canada.

    Its portfolio already includes extremely familiar brands: Cracker Barrel, Black Diamond, P’tit Québec, Balderson, Ficello, Astro, IÖGO, Olympic, Lactantia, Beatrice, Galbani and Président, among others. If the acquisition of Agropur’s fine-cheese business receives Competition Bureau approval, OKA, Monsieur Gustav and L’Extra will be added to that list.

    From a dairy farmer’s perspective, there is an obvious positive argument here. A company that invests in Canadian plants and processes milk produced here is far more useful to our sector than growth based simply on importing finished dairy products.

    But how large do we want Lactalis to become?

    The downside is concentration.

    Lactalis is not simply a large processor. The group describes itself as the world’s leading dairy company, with 2025 revenue of €31.2 billion, 266 dairies and cheese plants in 49 countries and 124 acquisitions completed over twenty years.

    Acquisitions are therefore a core part of its strategy.

    In Canada, that strategy has already reshaped the dairy aisle. When Parmalat, now Lactalis Canada, acquired Kraft Heinz’s natural-cheese business, the Competition Bureau noted that the main competitors in regular grocery-store cheese were essentially Parmalat and Kraft Heinz, Saputo with Armstrong, and retailers’ private labels.

    The Bureau ultimately cleared that transaction in 2019, concluding that it was unlikely to substantially lessen competition. But each new acquisition gradually changes the landscape. The proposed purchase of OKA and Agropur’s other fine-cheese assets is itself expressly subject to Competition Bureau approval.

    The real question is not whether Lactalis is “too big” simply because it is foreign. The question is at what point the concentration of brands, plants and processing capacity in one group’s hands begins to reduce meaningful competition. That issue of market power in the dairy chain also connects directly to the debate over farm-gate prices, processing and the supposedly free dairy market.

    The Agropur case is especially sensitive

    When market share moves from Saputo to Lactalis, it is essentially a transfer between two private companies processing Canadian milk.

    Agropur is different. Agropur is owned by its dairy-farmer members. A business held by the cooperative therefore allows farmers, at least in principle, to participate more directly in the value created beyond the farm gate.

    Seeing a producer-owned cooperative sell iconic brands such as OKA to a multinational can therefore create perfectly legitimate discomfort.

    But Agropur’s own strategy also matters. The cooperative says its fine-cheese operations were profitable, but represented only about 2% of consolidated revenue and 2% of the milk processed in its Canadian plants. Agropur says it wants to focus investment on value-added fluid milk, industrial cheese, butter and dairy ingredients.

    A few months before announcing the fine-cheese sale, Agropur unveiled investment projects approaching $1 billion in Beauceville, Quebec, and Bedford, Nova Scotia, to expand its capacity in value-added dairy proteins. Those projects still require final approval, but they suggest the cooperative is not abandoning the Canadian market. It is choosing where to concentrate its capital.

    What about Saputo’s sale in the United Kingdom?

    The agreement announced August 14 for Saputo’s British dairy operations is striking in size: £988 million. More than anything, it demonstrates Lactalis’s financial strength and appetite for acquisitions on a global scale.

    It would be risky, however, to conclude that Saputo is selling in the United Kingdom because it expects an imminent battle with Lactalis in Canada. There is currently no public evidence establishing that connection.

    The broader hypothesis remains interesting: in an increasingly concentrated global industry, major processors are choosing their markets and product categories with greater discipline. Some assets are sold to free up capital while other sectors receive large investments.

    What we can say with confidence is that Lactalis is currently on the buying side.

    Supply management does not answer this question

    This development also highlights a distinction that is sometimes overlooked in debates about supply management and the pressures facing Canada’s dairy market.

    Supply management is primarily designed to govern milk production, farm-gate pricing and access to the Canadian market. It does not guarantee that the companies processing that milk are Canadian-owned, much less farmer-owned.

    It is entirely possible to maintain strong Canadian milk production under supply management while seeing a growing share of brands and processing capacity owned by large international groups.

    That is not automatically a bad thing. A global processor can bring capital, technology, market access and marketing capacity that smaller companies may not have. But ownership of processing also influences where profits end up and who holds bargaining power in the food chain.

    So, good news or bad news?

    Probably both.

    For Canadian dairy farmers, Lactalis can be good news when it invests here, modernizes plants and grows sales using Canadian milk. The company has the financial resources to support its brands against powerful retailers, develop new products and compete with other global giants.

    But Lactalis’s growth becomes a concern when it steadily reduces the number of major independent processors and concentrates ever more brands and production capacity in the same hands.

    The problem may therefore not be Lactalis itself. It is the speed at which the global dairy sector is consolidating.

    For Agropur and Saputo, the recent transactions may be perfectly rational portfolio decisions. For Lactalis, they clearly fit a growth strategy that has been unfolding for decades.

    And for us as dairy farmers, the issue deserves close attention. We benefit from having strong processors capable of investing and selling our products. But we also benefit from having enough of them that no single company becomes indispensable.

    Sources

  • The Problems With Dairy Quota

    The Problems With Dairy Quota

    Before getting into this, I want to make one thing clear: I am absolutely not opposed to supply management. It is a useful system that supports a major pillar of Canadian agriculture, with effects that extend beyond dairy alone. I will not get into poultry or eggs because those are not sectors I know well.

    That does not prevent me from taking a critical look at the system. At its core, supply management helps preserve the dairy sector by ensuring that production within allocated limits has a market. But it also has major flaws that, in my view, need to be named.

    Three important problems

    I have identified three issues that deserve serious attention:

    • the $24,000 quota price ceiling;
    • the right not to produce quota that is held;
    • the lack of, and opposition to, a quota-rental mechanism.

    I will explain why I think each of these creates problems and suggest ways they could be addressed. I am not going to change the system by myself. Dairy Farmers of Quebec and the Canadian dairy organizations function democratically. By throwing this small stone into the pond, I hope to contribute to the discussion.

    The $24,000 price ceiling

    The ceiling on the price of one kilogram of quota was set at $25,000 jointly by Quebec and Ontario in 2010. The goal was to limit price increases in an asset that was, and still is, a barrier to entering dairy production. A few years later, in 2016, the price was lowered to $24,000 per kilogram following changes that transferred non-saleable quota into saleable quota and diluted its value.

    Although a price cap may sound reasonable, it produces unwanted side effects.

    Basic economic principles tell us that a price ceiling increases demand in a market where supply is limited. Leaving that ceiling unindexed over time makes the problem even worse. If the price had merely tracked inflation since 2016, it would now be around $31,000 per kilogram. Had it been indexed from the start in 2010, it would be above $35,000.

    That is one reason why farms can now buy only tiny fractions of a kilogram of quota in many monthly exchanges. Supply remains structurally below demand. Which leads to the second problem.

    The right not to produce

    Many dairy farms want to expand. New barns are built, old ones are renovated and better production methods are adopted. Even with the same number of cows, milk output can increase, and with it the need for quota that allows that additional production to be marketed.

    While Quebec dairy producers collectively have an obligation to fill the production target allocated to the province, an individual farm can accumulate quota without producing it.

    The explanation is straightforward. Because farms can often buy only fractions of a kilogram each month, a business planning an expansion starts accumulating production rights years in advance. Over time, a farm can build up 10, 20 kilograms or more before the project is ready.

    Across Quebec, hundreds of kilograms can therefore sit in reserve without being produced. I do not blame the farms that make that choice. Who is going to invest millions in a new building that could sit partly empty for months because quota is unavailable?

    There is also a certain amount of quota that remains unproduced for other reasons. Consecutive increases in production rights have followed growth in overall Canadian demand for milk and dairy products. Some farms keep those rights in anticipation of future projects, while others simply leave them unused.

    The lack of a rental mechanism

    There is essentially one way to trade dairy quota: buying and selling. Most provinces participating in the system do not allow ordinary rental, although some temporary transfers are possible.

    A farm that accumulates quota for a future expansion can therefore end up holding a significant amount of dormant production rights in its asset portfolio. One unintended consequence is that extra quota may need to be issued collectively to make sure Quebec reaches its production target.

    Large sums of money are frozen in the system. Ten kilograms of quota represent $240,000 tied up in an asset that produces no milk revenue and no interest income. Worse, inflation slowly erodes the real value of that capital.

    There are several arguments against rental. Some are valid, while others strike me as more self-interested. Two of the most common are:

    • the fear that farms would buy quota solely to rent it out;
    • the concern that rental would financially reward poor producers.

    Rental rules could be designed to prevent quota from being purchased purely as a rental investment. It could be limited to a percentage of quota owned, or permitted only for a defined period when a producer is accumulating quota for a major expansion.

    I do not find the second objection convincing. If a producer, good or bad, can rent out part of an unused production right, that can benefit the system as a whole. Dormant quota is finally put back into production.

    My proposals

    The price ceiling

    It is long past time to start indexing the price of dairy quota more aggressively. Every year we fail to do so makes the imbalance worse. If the ceiling increased modestly each year, slightly above the previous year’s inflation rate, the system could begin catching up. Accumulating quota far in advance would gradually become less attractive, and the quantities allocated in each monthly exchange could increase. Buying years ahead would lose some of its appeal, and more quota purchased would actually be produced.

    The right not to produce

    Not producing quota should become a temporary situation, not a structural outcome. We collectively have an obligation to fill our production target, and that should ultimately be reflected at the farm level.

    Above a certain percentage of unproduced quota, that production right could be temporarily redistributed across farms. Not confiscated, not forcibly sold, simply redistributed until the owner is ready to use it.

    Or we eventually move to the final option.

    Allow rental

    I understand why many farms hold dormant quota. As explained above, they are preparing expansions. The other cases likely represent a smaller share of the unproduced total.

    A farm preparing an expansion and buying quota in advance should be able, for a limited period, to rent out that production right. Not partially, not for a few days here and there. Rent it out fully, then take it back when the farm is ready.

    There are farms ready to produce but constrained by the system. There are quotas sitting idle for months or years that could be used immediately. Leaving production rights dormant because of ideological rigidity is harmful to everyone.

    Naming the blind spots

    The dairy quota system is neither absurd nor something that should be discarded. It has delivered remarkable stability in a sector that, elsewhere, has often been sacrificed to market volatility. But that very strength makes its rigidities harder to correct.

    The frozen price ceiling, the right not to produce and the inability to rent are not isolated anomalies. Together, they protect quota value while restricting its circulation and use. Until those blind spots are named clearly, the same debates will keep coming back without ever being resolved.

    Thinking about these issues is not an attack on supply management. It is a way of taking its long-term future seriously. A durable system must be able to adapt, not only under pressure from crises, but through a clear-eyed look at its own limits.

  • Sylvain Charlebois vs. Supply Management: The Free Market He Is Selling Does Not Exist

    Sylvain Charlebois vs. Supply Management: The Free Market He Is Selling Does Not Exist

    Sylvain Charlebois deserves credit for forcing a debate about supply management. But by increasingly portraying it as the near-universal cause of the dairy sector’s problems, he ends up selling Canadians a solution, the “free market,” that barely exists anywhere in the global dairy industry.

    For years, the Dalhousie University professor has described supply management as a rigid, opaque system that is costly for consumers and responsible for the decline in the number of dairy farms. In his more recent columns, the language has become even harsher. He argues that the system is “killing” Canada’s dairy sector, isolating the country and protecting a comfortable rent for producers.

    That language is effective. It creates an easy villain. But it greatly oversimplifies a much more complex economic reality and consistently minimizes the central question: what would actually happen if Canada abandoned supply management?

    The farm-gate price is not the grocery-store price

    One of the most persistent shortcuts in this debate is to directly associate supply management with the price paid by consumers. Yet the federal government itself notes that, in dairy, it is the price paid to farmers that is regulated. With a few provincial exceptions for fluid milk, retail dairy prices are not regulated.

    Between the farm and the shelf are processing, packaging, transportation, distribution and retailer margins. Presenting the farm-gate price as the main barrier to affordability therefore shifts attention away from the rest of the chain, precisely where corporate concentration and market power are often strongest.

    Supply management is not a blank cheque handed to farmers. The milk price is based in part on a national cost-of-production survey. The objective is to allow an efficient farm to cover its costs and earn reasonable compensation rather than forcing farm families to absorb every market collapse on their own.

    The disappearance of farms is not proof against the system

    Sylvain Charlebois often points to the decline in the number of dairy farms in Canada since supply management was introduced. The number is real. The conclusion he draws from it is much less convincing.

    Consolidation is also happening in the United States, where there is no Canadian-style supply management. The U.S. Department of Agriculture has long documented dairy production becoming concentrated in fewer, larger operations attracted by lower unit costs. Mechanization, rising milk yield per cow, building costs, labour shortages and succession challenges are reshaping agriculture across developed countries.

    We can certainly debate quota prices, access for young farmers or whether the system encourages enough innovation. But blaming consolidation on supply management confuses a global trend with a uniquely Canadian policy.

    The dairy “free market” is heavily supported by government

    This is the biggest blind spot in Charlebois’s argument. U.S. dairy farmers are not simply left to market forces. They have access to the federal Dairy Margin Coverage program, which makes payments when the margin between milk prices and feed costs falls below certain levels. For 2026, the USDA forecast includes significant payments under this program.

    The European Union also monitors its dairy market, provides direct payments through the Common Agricultural Policy and retains public intervention and private-storage mechanisms to respond to imbalances. When prices collapse, governments intervene. When surpluses accumulate, they buy, store, subsidize or compensate.

    The Canadian difference is therefore not that Canada supports farmers while everyone else lets the market operate freely. It is that Canada organizes production around domestic demand and relies more heavily on market revenue, instead of periodically socializing losses through public programs.

    Charlebois’s own report contradicts some of his harshest claims

    Perhaps the most convincing criticism of his recent columns can be found in his own 2020 report, Supply Management 2.0, published with colleagues from Dalhousie University and the University of Guelph.

    The report says that immediate dismantling is not a viable solution. It acknowledges that U.S. milk could flood the Canadian market, that the domestic industry could become dependent on imports and that consumers could even end up paying more after the system was abolished. Most importantly, the report recognizes that a solution that appears efficient in a pure free-market model is not necessarily optimal when farm livelihoods, rural economies and Canadian values are considered.

    Those nuances matter. Yet they are often missing when Charlebois now says supply management is “killing” the sector or damaging Canada’s international credibility. Between the academic analysis and the public columns, conditional language often disappears in favour of a punchier slogan.

    Transparency can improve, but it is not nonexistent

    Charlebois is right about one thing: a system that organizes a national market has to continually earn public trust. Pricing mechanisms, quota decisions and the effects of trade policy need to be explained in much more accessible language. Farm organizations have sometimes spoken mainly to their members, leaving opponents to define the system for the broader public.

    But calling the system opaque as though its rules were secret is excessive. The Canadian Dairy Commission is a Crown corporation accountable to Parliament. Prices, formulas, adjustments and decisions are governed by public laws and regulations. Producer organizations also point out that pricing formulas include production costs and inflation measures and that changes are publicly announced.

    More transparency and better communication should be demanded. But the need for improvement should not be turned into an accusation of a hidden rent.

    Reform does not require dismantling

    Supply management is not perfect. The cost of entry for new farmers is real. Rules can slow some forms of innovation. Successive trade concessions have made the system more complex. Farmers also have to respond clearly to expectations around animal welfare, the environment and productivity.

    But none of those criticisms proves that Canada would be better off fully exposing domestic production to subsidized surpluses from neighbouring countries and then replacing market stability with government payments whenever prices collapse.

    The debate Sylvain Charlebois is pushing deserves better than his own slogans. Yes, supply management must evolve. Yes, it should be more transparent and better adapted to the next generation. No, it is not the sole cause of every problem in Canadian dairy. And no, dismantling it would not magically give consumers cheaper milk, farmers higher incomes and Canada new export markets.

    In a world where major agricultural powers subsidize, protect and intervene heavily, keeping a system that aligns production with demand is not a rejection of economics. It is an agricultural-policy choice. It can be criticized. But before condemning it, we should compare this real system with the real systems used elsewhere, not with an imaginary free market.

    Since then, Sylvain Charlebois has put forward ten “myths” about supply management. I examined them one by one in my detailed analysis of his ten supply-management myths.

    Further reading on supply management

    Sources

    Photo: Janvez, Wikimedia Commons, CC BY-SA 4.0.

  • Dairy Farmers Are Millionaires. Yes, but…

    Dairy Farmers Are Millionaires. Yes, but…

    We hear it regularly whenever agriculture comes up: “Dairy farmers are millionaires.”

    That is not entirely false.

    Many dairy farms own assets worth several million dollars: land, buildings, livestock, machinery, equipment and, in Canada, quota. Taken together, all of that can represent a considerable amount of wealth.

    So why do we not see all these farmers living like millionaires?

    Because two very different things are being confused: owning valuable assets and earning a high income.

    A multimillion-dollar farm is not a bank account

    Imagine a farm valued at $5 million.

    That does not mean its owner personally has $5 million. You first have to subtract the farm’s debt and account for the fact that the business may be owned by several shareholders or members of the same family. A farm with $5 million in assets, $2 million in debt and several owners clearly does not make each of them a person with $5 million to spend.

    Most importantly, those millions are tied up in productive assets.

    A hectare of land worth $30,000, $40,000 or $50,000 does not pay the grocery bill. Neither does a valuable barn. The same is true of a tractor, a cow or dairy quota.

    Those assets exist to produce.

    To turn that wealth into cash, a farmer generally has to sell part of the production system, borrow more money or, ultimately, sell the business.

    It is real wealth. But it is nothing like holding a few million dollars in financial investments and being able to draw on them to fund your lifestyle.

    What do farms actually pay out?

    A dairy farmer usually does not punch a time clock when entering or leaving the barn. Yet the hours add up: animal care, feeding, milking, field work, machinery maintenance, repairs, administration, paperwork, emergencies, calvings, weekends and long days dictated by weather.

    Statistics Canada data provide a useful glimpse of what farm families actually receive in wages.

    In 2023, Canadian dairy farms paid an average of $43,710 in salaries and wages to family members, according to Statistics Canada’s Farm Financial Survey.

    That figure has to be interpreted carefully. It can cover more than one family member and does not include dividends or certain withdrawals from the business. It is therefore not the “average dairy farmer salary.”

    But it illustrates the contrast very clearly: the value of a farm and the money actually paid to the people working there are two very different realities.

    A business owner can also build equity as debt is paid down or assets appreciate. That increases net worth without necessarily increasing the amount of money available for day-to-day living.

    In other words, owning a share of a business worth several million dollars absolutely does not mean receiving the kind of income usually associated with a millionaire.

    “Then just sell the farm”

    That is usually the next response.

    If the farm is worth millions, why not simply sell it?

    Because a farm is not just an investment.

    It is the farmer’s workplace. It is what generates income. Often, it is also a business the family has operated for generations and hopes to pass on to the next one.

    Telling a farmer they can become rich by selling the farm is therefore a bit like saying: “You could have a lot of money if you liquidated your business and gave up your profession.”

    Technically, that can sometimes be true.

    But even then, the gross sale price is not what ends up in the seller’s pocket. Debt must be repaid, transaction costs paid and, depending on the situation, taxes may also apply.

    And that still says very little about the farmer’s standard of living during the thirty or forty years spent operating the business.

    Part of those millions may never be cashed out

    Family farms have another important characteristic: they are often transferred to the next generation for less than full market value.

    That is not necessarily an act of pure generosity.

    A dairy farm may hold enormous asset value without generating enough profit for a young farmer to borrow the full market value of the business.

    Take again a farm worth several million dollars.

    If the older generation demands every dollar of that value at transfer, the successor has to come up with enormous capital or take on massive debt to buy the business. The same farm then has to generate enough cash to service that debt, pay operating expenses, reinvest and support the new generation.

    At some point, the numbers simply stop working.

    So for the farm to continue, owners may agree to transfer part of the business below market value.

    In other words, a dairy farmer can spend a career building several million dollars of value inside a business, never personally have access to those millions, and then voluntarily give up part of that value so the farm can survive after retirement.

    That is a rather unusual definition of a millionaire.

    But the wealth is still real

    It would be just as misleading to go to the opposite extreme and pretend the value of farms does not matter.

    It matters a great deal.

    A dairy farmer who owns a business with substantial equity has real wealth. That asset can serve as collateral, appreciate in value and eventually be sold. All else being equal, that is obviously not the same financial situation as someone who owns no assets.

    And if an owner chooses to liquidate the farm at full market value rather than transfer it, they may indeed realize a significant amount of accumulated wealth.

    There is no reason to deny that.

    But that is not the point.

    The question is whether the value of a farm tells us the income and living standard of the farmer operating it.

    And there, the answer is clearly no.

    Millionaires on paper

    So, are dairy farmers millionaires?

    For some, if you add up the net value of their ownership stake in the business, yes.

    But if by “millionaire” we picture someone with a very high income, substantial liquidity and millions of dollars they can freely spend, the image quickly becomes misleading.

    A farmer can simultaneously own a share of a multimillion-dollar business, work 60 hours or more in some weeks, draw a relatively modest income and hope one day to transfer that business to their children for far less than an outside buyer might be willing to pay.

    That is not a contradiction.

    It is simply the difference between being wealthy in assets and being wealthy in available cash.

    And when we talk about dairy farmers’ income, that distinction deserves to be made.

    This claim is also one of the ten “myths” about supply management raised by Sylvain Charlebois that I examined point by point.

    Further reading

  • Supply Management: Is Canada’s Agricultural Shield Beginning to Crack?

    Supply Management: Is Canada’s Agricultural Shield Beginning to Crack?

    Canada’s supply management system has survived decades of trade negotiations, several changes of government and repeated campaigns predicting its imminent demise. It is still standing, and since 2025 it has even benefited from unprecedented legislative protection. Yet rarely has the system been placed so directly at the centre of a trade power struggle.

    The threat no longer takes only the form of an explicit demand for abolition. It appears through a succession of concessions, technical challenges and tariff pressure that can, piece by piece, reduce the share of the market actually reserved for Canadian producers. This gradual erosion, more than any sudden deregulation, is now the main danger.

    A system that organizes the market rather than subsidizing it

    Supply management rests on three pillars: matching production to Canadian demand, a pricing mechanism intended to cover the costs of efficient production and import controls. It applies to dairy, chicken, turkey, table eggs and broiler hatching eggs. The Farm Products Council of Canada describes it as a way to avoid both overproduction and shortages, provide fair returns to producers and maintain a stable supply.

    The principle is straightforward: produce according to what the domestic market can absorb. In non-quota sectors, a good year can quickly become bad news if all producers expand at the same time and push prices down. Supply management reduces this classic cycle of expansion, surplus, price collapse and consolidation.

    The model does not guarantee wealth. Farms remain exposed to feed, energy, labour, building and financing costs. It does, however, provide predictability that supports long-term investment without relying as heavily on public payments when markets collapse. In 2024, supply-managed sectors generated more than C$15 billion in farm cash receipts, according to Agriculture and Agri-Food Canada transition materials.

    The immediate threat: the power struggle with the United States

    The review of the Canada-United States-Mexico Agreement was already expected to bring supply-managed agriculture back to the forefront. Washington has long criticized Canada’s over-quota tariffs, dairy tariff-rate quota administration and certain pricing mechanisms. The 2026 U.S. National Trade Estimate Report maintains those complaints.

    Canadian tariffs that can exceed 200% are often presented as proof of a completely closed market. That description is incomplete. Those rates mainly apply to imports above negotiated quota volumes. Within those quotas, significant quantities of foreign products already enter Canada at reduced or zero tariffs. Federal data on tariff-rate quotas for supply-managed products show separate access commitments under the World Trade Organization, the CPTPP and CUSMA.

    By the summer of 2026, the confrontation had become more concrete. The U.S. administration linked the treatment of American dairy exporters to a new tariff measure against Canada. In a July 20, 2026 statement, the U.S. Trade Representative invoked Section 338 and announced additional duties while specifically criticizing Canada’s treatment of the U.S. dairy sector.

    Supply management has therefore become a bargaining chip in a dispute that also touches automobiles, alcohol, public procurement and other Canadian policies. The danger is clear: even if Ottawa refuses to abolish the system, it could face pressure to grant more market access in exchange for concessions elsewhere.

    The erosion began long ago

    Canada preserved the architecture of supply management in its major trade agreements, but it gave up part of its domestic market in each of the last major negotiations. The agreement with the European Union, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and CUSMA all created or expanded import quotas.

    Each additional access commitment may look limited on its own. Taken together, they represent sales Canadian farms can no longer make. The problem is structural: domestic demand does not automatically rise to offset imports. When foreign products take a larger share of the market, Canadian production must fall or grow more slowly.

    The federal government itself acknowledged these losses by creating compensation programs for producers and processors. Those payments helped affected businesses invest, but temporary compensation does not replace a market lost permanently. It mainly confirms that trade concessions carry a real cost.

    The CPTPP illustrates the mechanism well. Canada granted permanent quotas for dairy, poultry and eggs, phased in over time and set to expand. The official summary of the agreement says market access was granted while the three pillars of supply management were maintained. That is legally true, but economically, the import-control pillar can be weakened without disappearing altogether.

    Bill C-202: a real shield, but not an absolute guarantee

    Since June 26, 2025, Bill C-202 has prohibited the Minister of Foreign Affairs from entering into certain trade commitments that would increase tariff-rate quotas on supply-managed products or reduce over-quota tariffs. This is a major change: protection of the system no longer depends only on a political promise repeated at every negotiation.

    The law sharply reduces the room available to a Canadian negotiator who might otherwise trade away more dairy, poultry or egg market access for gains in another sector. The government says this is consistent with its policy of defending all three pillars, as explained in Global Affairs Canada briefing documents.

    But no ordinary statute is irreversible. A future Parliament can amend a law. Commercial pressure can also shift toward areas the law protects less directly: quota-allocation rules, composition standards, product classifications, import permits or pricing policies. The battle can therefore become more technical without becoming less important.

    Critics of supply management argue that C-202 removes a bargaining chip from Canadian negotiators in advance. That criticism deserves consideration, but it also reveals the law’s real purpose: to stop supply-managed farms from repeatedly serving as trade currency for other industries. After three major agreements that gave away market access, drawing a line is hardly excessive.

    Technical challenges: opening the market without abolishing the system

    Recent dairy disputes have not necessarily targeted the elimination of Canadian production quotas. They have focused mainly on how Canada allocates import quotas. The United States challenged the share reserved for Canadian processors, arguing that the method limited commercial opportunities for U.S. exporters.

    That may sound administrative, but the consequences can be substantial. A quota can exist on paper; allocation determines who can use it, which products enter and when. Changing those rules can increase competition in specific parts of the Canadian market without formally reopening the entire agreement.

    The same logic applies to product categories and ingredients. In a food industry where milk proteins, preparations and processed products cross borders in many forms, a regulatory definition can matter as much as a tariff. Defending the system therefore requires constant technical expertise, not just broad political declarations.

    Domestic pressure: food prices, concentration and the battle over the narrative

    Supply management is also vulnerable politically within Canada. During periods of food inflation, it is tempting to blame the price of milk, eggs or chicken entirely on farm income. Yet the farm-gate price is only part of the retail price. Processing, transportation, packaging, distribution and retail margins all intervene between the barn and the checkout.

    The system must still accept transparency. Its defenders gain nothing by pretending it is perfect. Entry costs tied to quota can complicate farm transfers and new entrants. Rules must evolve with consumption. Producers must also demonstrate progress on animal welfare, the environment and productivity.

    But abolishing supply management would not eliminate Canadian production costs or concentration in processing and retail. It would mainly shift more risk onto farms and expose the domestic market more directly to foreign surpluses. In countries that support producers differently, assistance often comes straight from the public treasury. Consumers then pay part of their food bill as taxpayers rather than at the grocery store.

    Why defending it goes beyond farmers

    The debate is not only about quota values or the income of a few thousand farms. It concerns Canada’s ability to maintain production across its territory, close to consumers and subject to Canadian standards. In its National Food Security Strategy, Ottawa now presents supply management as a fundamental element of Canadian self-sufficiency in milk, eggs and poultry, as well as rural vitality.

    The pandemic, animal diseases, trade wars and logistics disruptions have shown that food supply cannot be reduced to the lowest price available on the world market on a given day. Lost production capacity cannot be rebuilt instantly. Geographically distributed farms are food infrastructure as much as they are an economic sector.

    The stability provided by the system also helps processors plan supplies and allows consumers to count on regular production. It reduces the violent swings between surpluses that devastate farmers and shortages that raise costs for the public.

    What to watch now

    The first line of defence will be the concrete application of C-202 during CUSMA discussions. Ottawa will have to resist not only requests for additional access, but also equivalent concessions disguised as technical changes.

    The administration of existing quotas will also need close attention. Canada must respect the agreements it has signed or risk adverse rulings and retaliation. But respecting negotiated access does not mean offering more than was agreed.

    Finally, farm organizations will need to explain the system more effectively to the public. The phrase “300% tariffs” is politically powerful because it is simple. The answer cannot merely be that it is misleading. It must explain volumes already imported, the difference between in-quota and over-quota tariffs, the composition of retail prices and the forms of farm support used elsewhere.

    An agricultural policy choice, not an anomaly to apologize for

    Supply management is not an accidental relic. It is a collective policy choice: match production to demand, pay prices that support viable domestic production and prevent the Canadian market from becoming an outlet for subsidized surpluses from major agricultural powers.

    Its main weakness today lies in accumulation. One small concession, then another; one technical change, then a new interpretation; one temporary compensation payment for a market lost forever. The system can keep its name and institutions while slowly being hollowed out.

    Canada’s legislative shield therefore arrives at a decisive moment. It does not remove the need to negotiate carefully, modernize the model or respond honestly to criticism. It does, however, establish a reasonable principle: dairy, poultry and egg producers should no longer be the automatic bargaining chip in every trade agreement.

    The question is no longer only whether supply management will survive. It is whether Canada is prepared to defend it in the details, where most of the battle is now being fought.

    Sources and references

  • Closed Dairy Market? The Numbers Say Otherwise

    Closed Dairy Market? The Numbers Say Otherwise

    For years, the United States has accused Canada of protecting its dairy market too aggressively. Yet when you look at actual trade flows and the use of CUSMA tariff-rate quotas, a much more nuanced picture emerges. Americans already sell far more dairy products to Canada than we sell to them, and in some categories they use almost all of the access they have been granted. On our side, several U.S. quotas available to Canadian products remain nearly empty.

    The debate deserves better than the image of a Canadian dairy market hermetically sealed against American products. The market is organized, quota-based and protected, yes. But closed? The numbers tell a different story.

    Nearly two and a half times more U.S. dairy products coming into Canada

    Start with the trade balance. According to 2024 data from the Canadian Dairy Information Centre cited by Dairy Farmers of Canada, the United States sold nearly C$880 million worth of dairy products to Canada, compared with about C$358 million in the other direction.

    In other words, the United States sells Canada nearly 2.5 times more dairy products than Canada sells to the United States.

    That figure does not prove that every Canadian rule is ideal. It does demonstrate something much simpler: the Canadian market is already an important outlet for the U.S. dairy industry.

    CUSMA nevertheless provides a degree of reciprocity

    CUSMA created new tariff-rate quotas for dairy products. A tariff-rate quota allows a specified quantity of a product to enter at a low or zero tariff. Once that quantity is exceeded, the product can generally still be imported, but at a much higher tariff.

    On paper, several dairy concessions are relatively reciprocal. Canada opened new volumes to U.S. products, and the United States opened volumes to Canadian products. Cheese is especially revealing because both sides had total access of roughly 12.5 million kilograms in 2025, even though the tariff-category structure is not perfectly identical.

    The question is therefore not only how many tonnes are authorized. It is how much of that access is actually used.

    Cheese: 86% on one side, 2.33% on the other

    In 2025, Canada granted U.S. products two cheese quotas under CUSMA: 6.25 million kg for cheese of all types and 6.25 million kg for industrial cheese.

    U.S. imports used 97.85% of the first quota and 74.66% of the second. Combined, that represents about 10.78 million kg out of 12.5 million, for an overall utilization rate of roughly 86.25%.

    Now look in the other direction.

    The historical fill document published by U.S. Customs and Border Protection shows that in 2025 Canada also had access to a U.S. cheese quota of 12.5 million kg. Canadian imports into the United States under that quota reached only 290,702 kg.

    Utilization rate: 2.33%.

    Put another way, for every kilogram of Canadian cheese that entered the United States under this quota, roughly 42 kilograms of available access went unused.

    That is probably the most important number in the entire file. For cheese, our immediate problem is clearly not that the U.S. quota is too small. We are nowhere close to using it.

    The same pattern appears elsewhere

    Cheese is not an isolated case. The 2025 data show other major gaps.

    • Butter, cream and cream powder: U.S. products used about 94.47% of their Canadian quota of 4.5 million kg. Canadian products used only 25.55% of the corresponding U.S. quota.
    • Skim milk powder: U.S. imports used about 11.86% of their Canadian quota of 7.5 million kg. Canada used only 0.74% of its U.S. quota of the same size.
    • Whole milk powder: Canada used only 0.13% of its U.S. quota in 2025.
    • Concentrated milk: Canada used none of its 1.38 million litres of U.S. access in 2025.

    It would still be wrong to draw an overly simple conclusion. Americans do not fill every quota they have in Canada. Their 50-million-kg milk quota, for example, was only about 17.3% utilized in 2025. The picture varies sharply by product.

    But one thing is clear: in several categories where Canada exports very little to the United States, the size of the quota is not the immediate constraint.

    Why do we export so little?

    This is where the issue becomes more interesting than a simple political fight over tariffs.

    Canadian supply management is designed first and foremost to supply the domestic market. Production is adjusted to Canadian demand. The United States, by contrast, has a much larger dairy industry, very large processing capacity and export infrastructure developed over many years.

    For an American buyer, the question is straightforward. Why import cheese, powder or a dairy ingredient from Canada if an equivalent product is available from a huge pool of U.S. suppliers without crossing a border?

    For a Canadian supplier to be attractive, it generally needs an additional advantage: a better price, a distinctive product, a sought-after brand, a particular quality attribute or a capability the U.S. market does not easily provide.

    This is an economic interpretation of the data, not proof of a single cause. But it fits the observed utilization rates much better than the idea that Canada is simply prevented from exporting because its quotas are too small.

    The United States also imposes regulatory friction

    Exporting a Canadian dairy product to the United States is not as simple as selling the same product inside Canada.

    For several dairy products covered by tariff-rate quotas, the U.S. importer must obtain an annual licence from the U.S. Department of Agriculture to qualify for the reduced tariff. Imported food must also meet Food and Drug Administration requirements. Relevant foreign facilities must be registered and shipments are subject to prior notice. Depending on the product and the importer, U.S. foreign-supplier verification rules may also apply.

    These steps create real friction. In a U.S. market with enormous domestic supply, they can be enough to make a Canadian supplier less attractive when it does not offer a clear commercial advantage.

    But it would be an exaggeration to present these rules as proof that Washington is artificially blocking Canadian dairy products.

    Because Canada also imposes rules on importers

    U.S. products entering Canada are also subject to regulatory obligations. Importers must comply with the Safe Food for Canadians Regulations, Canadian Food Inspection Agency requirements, Canadian composition and labelling standards and, for quota-controlled products, the permit system administered by Global Affairs Canada.

    Friction therefore exists in both directions. The systems are not perfectly identical, but the available data do not support the claim that low Canadian exports are simply the result of an artificially closed U.S. border.

    The imbalance appears to reflect more fundamental differences between the two industries: a Canadian industry organized mainly around its domestic market and a massive U.S. industry able to serve its home market while aggressively pursuing export opportunities.

    A much less symmetrical Canadian concession

    There is, however, one element of CUSMA that is much harder to describe as reciprocal.

    Under the agreement, Canada accepted thresholds on its global exports of skim milk powder, milk protein concentrates and certain infant formula products.

    For 2026-2027, the duty-free threshold is 37,596,820 kg for skim milk powder and milk protein concentrates, and 42,967,795 kg for infant formula. Above those thresholds, Canada must impose an export charge of C$0.54 per kg on the first category and C$4.25 per kg on the covered infant formula products.

    Most importantly, these restrictions do not apply only to sales to the United States or Mexico. They apply to Canadian exports to the entire world.

    That is an important concession to keep in mind when CUSMA is presented as a simple reciprocal exchange of dairy market access.

    Canada has already been challenged, and the story is more nuanced than it is often portrayed

    The United States has challenged the way Canada allocates dairy tariff-rate quotas for several years.

    In 2022, an initial CUSMA panel sided with the United States on an important point: Canada had reserved too large a share of certain quotas for processors. Ottawa then changed its system.

    Washington challenged the revised approach as well, including Canada’s market-share allocation method and the exclusion of retailers, restaurants and some other importers from direct allocations.

    This time, in 2023, two of the three panel members concluded that Canada’s revised measures did not violate the CUSMA provisions cited by the United States. The third member dissented.

    The current dispute is therefore not simply about how much U.S. cheese Canada agrees to let in. It is also about who in Canada can directly obtain the right to use that access.

    A protected market is not a closed market

    It is perfectly legitimate to criticize supply management. Tariff-rate quotas, quota values, competition, allocation methods and consumer costs are all fair subjects for debate.

    But words matter.

    A market in which the United States sells nearly C$880 million worth of dairy products a year, has new access negotiated under CUSMA and uses more than 86% of its cheese access is not a closed market.

    It is a protected and organized market.

    And when both sides of the border are compared, the paradox becomes difficult to ignore: the United States is asking for even more access to Canada’s dairy market even though it already runs a large dairy trade surplus with us. Meanwhile, Canada leaves most of several U.S. quotas available to Canadian exporters unused.

    So perhaps the real question is not only: why does Canada protect its market?

    It could also be: why does our industry use so little of the access it already has to the U.S. market?

    More on supply management

    Sources

  • Sylvain Charlebois’s 10 Myths About Supply Management: What He Gets Right, What He Oversimplifies, and What He Leaves Out

    Sylvain Charlebois’s 10 Myths About Supply Management: What He Gets Right, What He Oversimplifies, and What He Leaves Out

    On August 14, Sylvain Charlebois published “Ten myths Canadians need to stop believing about supply management”. The piece is more nuanced than some of his previous columns. On a few points, I even agree with him. On others, however, the facts presented are only partly accurate, stripped of essential context, or used to support conclusions they do not actually demonstrate.

    That is probably what disappoints me most. Sylvain Charlebois is not just any commentator: he is a professor, holds a research chair, and is regularly presented in the media as an expert on food policy. It is therefore reasonable to expect a particularly high level of rigour from him. Yet several times, the starting facts are not necessarily false, but the missing context, the conflation of different concepts, or the conclusions drawn from them give readers a distorted picture of reality.

    Rather than answer with ten opposing slogans, let’s look at his ten “myths” one by one.

    1. Are dairy farmers millionaires?

    Yes, if you add up the value of the land, buildings, herd, machinery and quota, many dairy farms are worth several million dollars. But a six-million-dollar farm is not a six-million-dollar bank account.

    The value of those assets, by itself, tells us nothing about a farmer’s disposable income, debt load, reinvestment needs or the return earned on all that tied-up capital. That is precisely the distinction I explored in Dairy farmers are millionaires. Yes, but….

    Charlebois nevertheless raises a real issue: high asset values make it harder for new farmers to enter the sector and for farms to be transferred to the next generation. But equating productive assets with personal wealth remains a shortcut.

    2. Does supply management protect the family farm?

    No, supply management has not prevented consolidation. The number of Canadian dairy farms has fallen sharply since the system was created. But that figure alone absolutely does not prove that the system failed to protect family farms. To know that, we have to compare what happened elsewhere.

    Between 2014 and 2024, Canada went from roughly 12,007 dairy farms to 9,256, a decline of 22.9%. Over the same period, the United States went from about 44,809 licensed dairy herds to 24,811, a decline of 44.6%. The proportion of farms that disappeared south of the border was therefore almost twice as high.

    This comparison does not prove that supply management alone explains the difference. The two countries have different farm structures, markets and policies. It does show, however, why simply counting the number of Canadian farms cannot serve as proof against the system. The data are instead consistent with the idea that more stable farm income can slow consolidation, even if it cannot stop it.

    3. Do Canadian dairy farmers receive no subsidies?

    It depends on what we call a subsidy. Charlebois groups together compensation payments, tariffs, import restrictions, administered prices and various public programs. In a broad economic sense, all of these can be described as support. But they are not equivalent mechanisms.

    A tariff is not a government cheque. An administered price is not a budget expenditure. And compensation paid because the government permanently gave up part of the domestic market in a trade agreement is not the same thing as a permanent program that tops up farm income every year when market prices collapse.

    The contrast with the United States remains important. American dairy farmers have access to federal programs such as Dairy Margin Coverage when their margins become insufficient. Canada chose a different mechanism: match production to demand and derive most farm income from the marketplace.

    Another shortcut deserves attention. In his “ten myths” article, Charlebois refers to a national dairy marketing budget approaching $200 million while discussing the “dairy lobby.” But that does not mean $200 million is being spent on political lobbying. Producer-funded money supports advertising, promotion, market development, education and nutrition programs, sponsorships, research and other industry initiatives. As in many other industries, only part of that activity is directly related to political representation.

    4. Do trade agreements make every dairy farmer lose money?

    Charlebois emphasizes that individual farmers were not required to submit financial statements proving a farm-specific loss before receiving compensation. That is true. But that was not what the program was designed to measure.

    The Canadian government permanently granted foreign competitors access to a portion of the Canadian dairy market. Compensation was then distributed in proportion to quota held, meaning according to each farm’s share of production capacity in that market. A farmer holding twice as much quota did not receive the same cheque as a smaller producer: the compensation was proportionally larger.

    That approach strikes me as about as fair as it could reasonably have been. The loss is structural and collective, not simply a decline in accounting income observed in a given year. Quota is precisely the instrument that allocates each producer’s share of the Canadian market.

    It is also worth remembering that farmers themselves finance the promotion and development of that market through levies tied to their production. Advertising, educational programs, market development, sponsorships, research and other initiatives are funded collectively. When a government then decides to permanently give away part of the market that producers helped build, compensating farms in proportion to their market share is anything but arbitrary.

    5. Would ending supply management automatically lower prices?

    On this point, Sylvain Charlebois and I agree. Ending supply management would not guarantee lower grocery prices. He acknowledges that himself in his ten myths.

    The farm-gate price of raw milk is only one component of the final retail price. Processing, energy, packaging, transportation, equipment, distribution, wages and benefits, including in plants with unionized workforces, as well as retail margins would all still exist if the price paid to farmers went down.

    There is also an important evolution in his public position. In another article published August 19 by La Vie agricole, following a discussion with farmer Frédéric Poulin and Simon Bégin, the reported conclusion is that none of the three wants to abolish supply management. Charlebois instead talks about reform. That is an important distinction, and one I readily acknowledge: our disagreement is therefore more about the diagnosis and the proposed reforms than about outright abolition.

    6. Do farmers alone bear the cost of dumped milk?

    Here, we have to distinguish between two situations that Charlebois’s wording tends to blur together.

    When an individual farm exceeds its quota and has to dispose of milk that cannot be marketed, the loss is borne directly by that farm. The dumped milk is not reimbursed through some collective mechanism.

    When there is instead a collective market surplus, the situation is different. Costs can be shared among producers through pooling mechanisms. In that case, yes, the loss is pooled. But it is still borne collectively by producers, not mysteriously transferred to someone else.

    We should also avoid speaking as though every surplus necessarily means whole milk being poured down the drain. Imbalances often involve milk components, particularly non-fat solids, which need outlets distinct from butterfat.

    7. Is milk dumping unavoidable?

    As in virtually every agri-food industry, losses exist. No real-world system uses 100% of every litre produced perfectly, every day of the year. The relevant question is therefore less whether waste exists than how large it actually is.

    On this point, official data paint a far less dramatic picture than some headlines suggest. Agriculture and Agri-Food Canada states that in 2023, more than 99% of raw milk produced on Canadian farms was processed and notes that milk disposal is rare in Canada. In other words, the system already processes virtually all the milk produced.

    We should be especially cautious with estimates claiming that several billion litres have been “dumped” since 2012. Those figures do not come from a national registry adding up actual measured volumes poured down drains. They are based on an estimate of the gap between theoretical production calculated from cow numbers and average yield, and the volumes actually sold to processors. That gap can include a variety of things, including milk fed to calves, milk that cannot be marketed, normal losses and methodological differences.

    That research can certainly raise a legitimate question about the quality of available data. But an indirect estimate of “missing milk” should not be presented as a precise measurement of billions of litres deliberately dumped.

    8. Has Canada fully complied with CUSMA?

    The disputes have to be distinguished from one another. The United States won an initial dispute over the way Canada reserved certain shares of its tariff-rate quotas for processors. Canada subsequently changed its rules.

    Washington challenged the revised system again. This time, in 2023, the majority of the panel rejected the main U.S. challenges. In other words, the fact that the United States is dissatisfied with Canada’s implementation of CUSMA does not automatically mean Canada is violating the agreement.

    Our interpretation of the current rules was therefore indeed upheld on important elements of the second dispute. I explored this issue in more detail in Closed dairy market? The numbers say otherwise and in my recent articles on U.S. demands.

    9. Does supply management guarantee food security?

    I would replace the word “guarantee” with contributes significantly to. No system can by itself guarantee food security in the face of a major animal-disease outbreak, a natural disaster, a logistical breakdown or an international crisis.

    But supply management contributes directly to the stability of our production capacity. It seeks to avoid both extremes: chronic surpluses that collapse prices and drive farms out of business, followed by shortages that send prices soaring and force us to rebuild lost production capacity quickly.

    Food security does not mean autarky. The fact that farmers use imported tractors, veterinary medicines or certain inputs does not make domestic dairy production capacity irrelevant. A farm that disappears cannot be restarted in a few months: it requires a herd, buildings, land, equipment, capital and labour. Maintaining that infrastructure in Canada is clearly one component of food-system resilience.

    10. Does reform mean abolishing the system overnight?

    On this, we agree again: reform means reform, not abolition. Keeping the system entirely unchanged and abolishing it immediately are not the only two options. That willingness to reform without necessarily abolishing the model also emerges from the discussion reported by La Vie agricole.

    The problem lies instead in the concrete content of the proposed reform. In his ten myths article, Charlebois proposes, among other things, a 15-year transition, lower industrial milk prices, easier entry for new farmers, more processing and innovation, and a gradual approach to quota values.

    But the measures that directly affect farms have one thing in common: they place most of the cost of the transition on producers. Lowering industrial milk prices reduces farm income. Reducing or gradually eliminating quota value simultaneously hits a major asset on farm balance sheets. Making it easier for new producers to enter without explaining how additional production would be allocated could also dilute the economic value of existing production rights.

    A reform of this kind could cause exactly the phenomenon Charlebois criticizes the current system for failing to prevent: accelerated consolidation. The most indebted farms, smaller farms and farms that have recently invested would be the most vulnerable. Better-capitalized operations could more easily absorb lower income, buy the assets of those leaving the sector and grow larger.

    A credible reform therefore has to answer a very simple question: who pays? If lower milk prices and the loss of quota value are absorbed mainly by producers, then the reform also needs to explain why that transition would not trigger a mass exit of farms.

    Criticize supply management, yes. Oversimplify reality, no.

    Supply management is not perfect. The cost of entry for the next generation, quota values, processing capacity, transparency, surpluses of certain milk components and industrial competitiveness are all real issues. Farmers and their organizations have to be willing to discuss them.

    But criticism deserves the same scrutiny. A farm worth several million dollars does not necessarily mean a farmer has millions in liquid wealth. The decline in the number of Canadian farms cannot be assessed without noting that consolidation has moved much faster in the United States. Trade compensation was not distributed equally at random: it was calculated according to quota held. More than 99% of Canadian raw milk is processed. And a U.S. challenge under CUSMA does not automatically amount to a Canadian violation.

    I have no problem with Sylvain Charlebois wanting to reform supply management. On some points, I even share his diagnosis. But when an academic with such a prominent public platform sets out to “debunk myths,” he should also accept that his own shortcuts will be examined with the same rigour.

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    Further reading