Hidden costs of supply management in a small market

Carter, Colin A.; Mérel, Pierre

doi:10.1111/caje.12206

Cited by 13 publications

(10 citation statements)

References 35 publications

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“…However, given that marketing boards are the sole sellers of chicken there is a one-to-one mapping of quantity and price. This mark-up equation has been used in past studies of supply management in Canada (Carter and Mérel 2016) and other agricultural industries (Huang and Sexton 1996;Fulton and Giannakas 2004). of production.…”

Section: Domestic Supplymentioning

confidence: 99%

“…Chicken production in Canada is supply managed with producer marketing boards enjoying nominal monopoly power. However, it is generally acknowledged that producer boards set quantities such that the market price is below the monopoly level (Carter and Mérel ). These below monopoly prices may reflect limit pricing, as marketing boards fear that exorbitant prices will invite policy change.…”

Section: Partial Equilibrium Modelmentioning

confidence: 99%

“…The relatively low value of θ is attributable to the inelasticity of demand with respect to the farm price (which by itself implies price is well below monopoly levels). Carter and Mérel () estimate θ using different rental values and elasticities—finding θ to be 0.084 or 0.114. To test the sensitivity of the results to this parameter, I have run two alternate models, one increases the elasticity of demand for chicken to −2, and the other assumes a constant percent mark‐up for chicken (such that the elasticity of demand with respect to the farm price is equal to the retail elasticity of demand).…”

Section: Partial Equilibrium Modelmentioning

confidence: 99%

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The Effects of Pricing Canadian Livestock Emissions

Slade

2017

Canadian J Agri Economics

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I examine the environmental and economic effects of pricing greenhouse gas emissions from livestock in Canada. Using a partial equilibrium model, I consider three different pricing policies: a consumer level tax, a producer level tax, and a producer subsidy. All policies price emissions at $50 per tonne of carbon dioxide equivalent. The producer level tax generates the greatest reduction in emissions at the lowest social cost per unit of emissions abatement. The producer subsidy results in a smaller reduction in emissions at a higher social cost, relative to the producer tax. However, the subsidy provides a substantial increase in producer surplus, which may make it a politically feasible second‐best policy. The consumer level tax results in a trivial reduction in emissions, at a social cost that is greater than the price placed on emissions. J'examine les effets environnementaux et économiques de l'imposition d'un prix sur les gaz à effets de serre provenant des animaux d'élevage canadiens. Au moyen d'un modèle d'équilibre partiel, je tiens compte de trois différentes politiques d'imposition de prix : taxer le consommateur, taxer le producteur, et subventionner le producteur. Toutes les politiques imposent les émissions au prix de 50$ par tonne en équivalent de dioxyde de carbone. Taxer l'éleveur génère la plus grande réduction des émissions au plus bas coût social par unité de réduction des émissions. Subventionner l'éleveur entraéne une plus petite réduction des émissions à coût social plus élevé, en comparaison û la taxe imposée à l'éleveur. Par contre, le choix de subventionner fournit une augmentation substantielle de surplus pour l'éleveur, faisant de cette option un bon deuxième choix envisageable au niveau politique. Taxer le consommateur ne produit qu'une réduction négligeable des émissions, à coût social plus élevé que le taux imposé sur les émissions.

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Section: Domestic Supplymentioning

confidence: 99%

Section: Partial Equilibrium Modelmentioning

confidence: 99%

Section: Partial Equilibrium Modelmentioning

confidence: 99%

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The Effects of Pricing Canadian Livestock Emissions

Slade

2017

Canadian J Agri Economics

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“…It is achieved by implementing production quotas and setting high tariffs applied on imported goods, considered as main pillars of the system. Supply management affects poultry, eggs, and dairy, but the latter sector represents about 80% of cash receipts govern under supply management [ 3 ].…”

Section: Introductionmentioning

confidence: 99%

Supply Management 2.0: A Policy Assessment and a Possible Roadmap for the Canadian Dairy Sector

Charlebois

Bowdridge

Lemieux

et al. 2021

Foods

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Many believe the current Canadian Dairy supply management system is outdated. Examining a recent consumer survey suggests consumers, especially among the younger generations, have mixed feelings about how the Canadian dairy industry is good for the environment or whether animals in the sector are humanely treated. The general Canadian public strongly supports financial stability for farmers, though is not fully educated about how supply management works. Issues regarding the centralization and amalgamation of the industry, making many regions underserved; recent milk dumping due to a strong shift in demand caused by COVID-19; and the popularity of dairy alternatives, show that the dairy sector in Canada is ill-prepared for major change. Dairy farmers are receiving compensation for trade deals recently ratified by the federal government, creating a precedent that will lead to an overcapitalized industry. The aim of this paper is to review the industry’s current state and suggest a roadmap for a more prosperous future.

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“…Rude and An (2013) developed a model that included multiple industrial products to assess the impacts of the Trans Pacific Partnership on Canada. Carter and Mérel (2016) developed a model to assess the removal of supply management with short-and long-run impacts if producers were able to export competitively in global markets. van Kooten (2019) looks at the compensation costs to eliminate supply management in dairy based on quota value and producer losses.…”

Section: Introductionmentioning

confidence: 99%

Impacts of trade liberalization in Canada's supply managed dairy industry

Biden

Ker

Duff

2020

Agricultural Economics

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Trade is an integral part of the Canadian economy. The main institutional drivers governing trade are bilateral and multilateral agreements outlining permissible trade distorting measures. Since its inception in 1972, Canada's supply management system has remained protected throughout trade negotiations. The system appears, by any economic measure, to be having an increasingly disproportional influence in recent trade negotiations. However, trade agreements serve not only to maximize social surplus, but also to maximize some measure of political welfare. Canada has recently negotiated three prominent trade agreements: the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) came into effect in the latter part of 2017; the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) came into effect at the end of 2018; and the Canada-United States-Mexico Agreement (CUSMA) could come into effect as early as late 2019. Collectively, these agreements have guaranteed increased market access for fresh and processed dairy products. We build a spatial partial equilibrium model of the Canadian dairy industry consisting of three regions and ten commodities to assess the individual and cumulative effect of these trade agreements. We pay particular attention to the institutional drivers within today's dairy sector: milk protein concentrates; component pricing including Class 7; and differential demand growth. We find that the aggregate impacts are: (i) a 7.0% decrease in the marginal retail price; (ii) a 4.7% decrease in the blended producer price; and (iii) an overall increase in social welfare of 5.5%. Worth noting, the decrease in producer surplus varies from 3.1% in the western region to 6.3% in the eastern region. Our results may be relevant to future negotiations as well as the publicly promised compensation package for dairy producers.

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Hidden costs of supply management in a small market

Cited by 13 publications

References 35 publications

The Effects of Pricing Canadian Livestock Emissions

The Effects of Pricing Canadian Livestock Emissions

Supply Management 2.0: A Policy Assessment and a Possible Roadmap for the Canadian Dairy Sector

Impacts of trade liberalization in Canada's supply managed dairy industry

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