The global dairy market is a complex web of rules, agreements, and restrictions aimed at balancing the interests of producers, processors, and consumers. A notable example is the supply management system implemented by Canada in the 1970s, a model that has sparked both admiration and criticism. This system could offer valuable lessons for Brazil, a country with a robust dairy structure but facing unique challenges in terms of competitiveness and sustainability.
The Canadian Model: Stability and Criticism
In the early 1970s, Canada introduced a supply management system to ensure a steady supply of high-quality dairy products, stable prices, and adequate economic returns for producers. According to the Library of Parliament, this model allocates production quotas to farmers based on annual demand estimates. Unlike other systems, quotas are calculated in kilograms of fat rather than liters of milk, and non-compliance can result in significant fines.
The system also regulates imports through tariff rate quotas, imposing high duties on products exceeding certain volumes. In some cases, such as butter, these tariffs can reach up to 300%. While this approach protects local producers, it has also drawn criticism, including accusations of massive milk waste. Over the past 10 years, an estimated 6.8 billion liters were discarded due to production surpluses.
Brazil vs. the Canadian Model
In Brazil, the dairy market operates under a different dynamic, though it also faces tensions between producers and importers. The absence of a quota system like Canada’s allows for greater production flexibility but also exposes farmers to price fluctuations and import competition, especially from Argentina and Uruguay.
For instance, Canada’s import regulations offer an interesting point of comparison. Between January and November 2024, Canada imported 147,000 tons of dairy solids, primarily cheese, keeping these volumes under control with high tariffs. In Brazil, a similar measure could protect local producers but might negatively impact consumer accessibility.
Global Reflections: A Rule-Free Market?
Leo Bertozzi, an agronomist and expert in agri-food management, reflects: “The free market is a utopia, and it all comes down to the size of the rules to manage it.” This statement highlights that even in seemingly free markets, regulatory mechanisms always exist.
For example, India heavily regulates its market to protect domestic producers, while in Australia and New Zealand, environmental regulations play a significant role. In the United States, threats of tariffs and tax incentives are also forms of intervention. In the European Union, interprofessional agreements and the Common Agricultural Policy (CAP) aim to harmonize prices and protect farmers.
For Brazil, understanding these dynamics could be key to finding an appropriate balance between regulation and competitiveness. For instance, international agreements and price harmonization could strengthen the dairy sector without excessively restricting the market.
Lessons for Brazil’s Dairy Sector
- Market Stability: An adapted quota system could help stabilize prices and ensure more predictable incomes for producers.
- Reducing Waste: Lessons from Canada on managing production surpluses could inspire local initiatives to prevent milk waste in Brazil.
- Import Regulation: Implementing mechanisms to control imports could strengthen local producers, though careful balance would be required to avoid harming consumers.
Conclusion
Canada’s case demonstrates that no market is truly free from rules. Each country tailors its policies to protect producers and ensure a steady food supply. In Brazil, where the dairy market faces internal and external pressures, reflecting on models like Canada’s could offer new perspectives to improve the sector’s competitiveness and sustainability.
Source: Article shared by Ester Venturelli, Animal Feed Analyst at CLAL Srl, Modena, Italy.
