On August 2, I proposed in this blog that the system of Supply Management in agri-industries requires a “critical examination”. I stand by that suggestion; however, it is quite possible that certain supply managed industries might actually survive that critical examination.
Many economists believe that Supply Management artificially reduces supply in order to increase price. This is partially true; however, the reality of the dairy sector, for example, does not fit well into microeconomic theory. For one thing, the input costs of a dairy farmer do not always conform to perfectly functioning markets. But the bigger problem is the highly perishable nature of milk and milk products. Unlike the notional widgets that economists are fond of, which can be stored indefinitely, milk must be delivered to the dairy within 48 hours and processed and sold within days or it is valueless.