Customers shop at a Loblaws store in Mississauga, Ont.Christopher Katsarov/The Globe and Mail
There is a simple test to tell if any government is serious about shaking up agricultural policy enough to boost competition and to cut the costs of groceries: Is supply management part of the plan?
In other words, is a government willing to tackle fundamental structural change and pivot away from the inward-looking, anti-consumer policies of the last half century?
The Carney government, like its predecessors, failed that test when unveiling its food security strategy in mid-June. There are worthy elements in that plan, but the proposals are heavy on tinkering and light on aggressive reforms.
Mark Carney unveils $1-billion food strategy for Canada to offset inflation
Prime Minister Mark Carney was mostly right in his diagnosis of what ails the grocery sector in Canada: an overreliance on foreign food processing, regulatory restrictions, and a short growing season that increases this country’s dependence on imported produce, made worse by currency fluctuations.
He’s on less solid ground in citing the concentration of food retailers as a factor. At first glance, that concentration looks like a slam-dunk problem: the five biggest retailers accounted for 75 per cent of the market in 2023, according to data in the government’s strategy. That is far greater concentration than in the United States.
But it is more or less the same as in Britain, where food prices are typically much lower than in Canada. There, the top five retailers had a collective 74.6 per cent of the market in February. The number of competitors is not a perfect predictor of the degree of competition.
That’s not to say there are not competition issues to be scrutinized. Restrictive covenants that allow big grocery chains to freeze out smaller competitors from malls are clearly anti-competitive. (The Competition Board has new powers to crack down on the practice.)
Vertical integration always merits scrutiny, particularly in a sector where retail players do control such a significant market share. To that end, the government’s proposals to foster greater competition at the wholesale level by creating food terminals to serve independent grocers has merit.
But much depends on exactly what the government intends to do when it floats the idea of “public investment [that] would help projects overcome high upfront capital costs.” Loan guarantees would be reasonable. A Ministry of Food Terminals, less so.
Further back in the food chain, there are substantial competitive issues to be addressed with the bottlenecks in slaughterhouse capacity.
Less realistic is the hint of ending the scourge of year-round imported vegetables and fruits. There is a reason that pineapples are not grown in Canadian greenhouses in December. Still, added greenhouse capacity couldn’t hurt.
Competition bureau launches study to examine how food supply chain affects grocery prices
The Competition Bureau has launched what it calls an “examination” of Canada’s food supply chain. In a statement, the bureau said it is “not excluding any sectors or policies in the food supply chain.”
Well, here is an early tip for the bureau of several groups of producers that have banded together to distort the market by propping up prices to the detriment of consumers. That would be the producers of milk, cheese, eggs and poultry, who all benefit from the government-sanctioned cartels that go by the lovely euphemism “supply management.”
Any real attempt to lower the grocery bills for Canadian families would need to address supply management. The Liberals’ food strategy barely mentions supply management, however, and then only to praise it as “fundamental to Canadian self-sufficiency” and contributing to “food sovereignty.”
That’s a tip-off to the anti-consumer, pro-subsidy subtext running through the Liberals’ strategy, a point underscored last week with the imposition of targeted tariffs on imported canned vegetables.
Strip out the gauzy anti-market and anti-trade rhetoric, and the reality is this: Supply management is, at its heart, the manipulation of supply and prices to benefit producers at the expense of consumers. It is a subsidy paid by families, often with far less income than the producers who are the beneficiaries of that subsidy.
The government’s food strategy laments that many of the drivers of food prices are beyond Canada’s control. Supply management is a notable exception. Revamping, if not scrapping, the food cartels is an opportunity that politicians have ignored for years – and still do.