People shop in the produce area at a Loblaws store in Toronto on May 3, 2018.Nathan Denette/The Canadian Press
Earlier this week, we took Canada’s agricultural supply management system to task over a report that said dairy farmers dumped 6.8 billion litres of raw milk between 2012 and 2021, an indefensible act but part and parcel of a system designed to restrict supply and shore up prices.
Supply management’s state-enforced manipulation of the farmgate price for milk (as well as for eggs and poultry) is effectively a regressive tax on consumers that also serves to shield some farmers from the vagaries of competition and high inflation.
Some farmers, but not most farmers.
The vast majority of Canada’s 189,000 farms aren’t protected by a cozy government racket. On the contrary, they are victims of oligopolies that Canada has allowed to prosper, and which raise their costs while lowering the prices they get for their produce and livestock.
It’s something Canada’s newly aggressive Competition Bureau needs to address, for the sake of farmers and consumers.
A new report by the Canadian Anti-Monopoly Project (CAMP) makes the point that, “Canadian farmers are price-takers trapped in the middle of a U-shaped power asymmetry between the companies from which they buy inputs from and the companies to whom they sell their products.”
One of the more startling examples of that is in the beef industry. While your eyes were watering at the price of a sirloin steak at your butcher this year, beef farmers in Canada have been struggling to make ends meet thanks to an insane level of concentration that forces them to accept low prices for their animals.
There are today just two companies controlling 99 per cent of Canada’s federally inspected beef slaughter capacity, according to a March, 2023, brief from the National Farmers Union. Between them, they operate only three facilities.
It wasn’t always like that. The CAMP report says 57 processing plants competed to handle 88 per cent of Canadian beef in 1974, and that, as recently as 2005, there were “19 beef packers in Canada that could facilitate the slaughter of small-scale herds (25 head a week) to commercial sizes (22,000 head a week).”
That healthy competition has been undone by Ottawa’s failure to prevent consolidation in the meat-processing industry over the past 50 years. The situation is identical across the agri-food business. All farms, especially small ones, are being squeezed by a lack of competition.
As the CAMP report reiterates, everything from seeds to fertilizer to farm equipment to veterinary pharmaceuticals are controlled by giant corporations that have swallowed up smaller companies to create oligopolies in their markets.
For instance, Canadian canola growers are dependent on just two companies for their seeds, according to the CAMP report. The National Farmers Union said in its 2023 brief that four companies control 95 per cent of the ammonia fertilizer business and 100 per cent of the urea fertilizer business.
Farm equipment sales are now dominated by three giant corporations, causing a rising tide of issues where a piece of equipment from one company won’t work with another piece from a competitor, or where manufacturers’ so-called “digital locks” prevent farmers from repairing their own equipment or hiring a third party to do so.
One upshot of this power imbalance has been the disappearance of smaller family farms. The farming industry is dominated by large-scale operations that benefit from consolidation. Meanwhile, 90 per cent of Canadian farms produce just one-third of all revenues, according to Statistics Canada.
It’s a distorted market situation as richly deserving of criticism as supply management or the consolidation of grocery store chains in Canada, but which rarely gets any serious attention from policy makers.
That could and should change with the new set of teeth given to the Competition Bureau over the past 10 months. As the CAMP report points out, the bureau now has market study powers that will let it investigate dominance in a given industry and prevent abuses, such as digital locks.
It can also start saying no to mergers that increase concentration in the agri-food industry, as it no longer is guided solely by the notion that efficiency is everything.
Whether doing so will lower food costs for consumers is another matter. The route from farm to table takes many turns. But it’s no more fair or right that small Canadian farms are at the mercy of market-distorting cartels than consumers are.