Neil Malik
Canada’s dairy system: Worth defending, or time to rethink it?
Canada’s dairy system: Worth defending, or time to rethink it?
Image: Unsplash
The Topline
- The deadline is looming for U.S. President Donald Trump’s 50 per cent tariffs on certain Canadian dairy products and other goods, which are set to take effect Aug. 19.
- Prime Minister Mark Carney told reporters at a press conference last week he is “loyal” to Canada’s dairy sector, while sources told The Globe and Mail that Ottawa is considering changes to how existing dairy import quotas are allocated.
- In a letter sent to Carney Aug. 9, Conservative Leader Pierre Poilievre demanded Carney make a “tariff-free” deal with the U.S. across several sectors, but did not mention dairy.
- Recent Angus Reid polling suggests 61 per cent of Canadians oppose allowing more dairy from the U.S. into Canada, while 42 per cent say Canada should stand firm and keep supply management off the table — even if the U.S. retaliates.
- Quebec is the country’s largest milk-producing province, making supply management a politically sensitive topic for Ottawa.
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Switch sides,
back and forth
You don’t know what you’ve got till it’s gone
Why is Canada so damn protective of our cows?
Canada’s dairy system isn’t like the one down south. We operate ours under a supply management model.
If that’s news to you, that’s a good sign. Think of it like a home plate umpire: when you don’t notice them, they’re probably doing a good job.
Under supply management, consumer demand is predicted in advance, a fair price is set, then suppliers are told how much to produce. Meanwhile, foreign imports are tightly controlled. It’s the exact opposite of a free market — and that’s the whole point.
In the case of dairy products — like milk, butter or cheese — farmers are given quotas meant to roughly match how much dairy Canadians actually consume. In return, farmers receive predictable and fair prices for what they produce.
That stability helps protect farmers from dramatic price swings, while also making it easier to plan, invest and survive from one year to the next. If you’re a fan of Clarkson’s Farm , then you’ll know how important that is.
Without supply management, Canadian dairy farmers might end up competing directly with some of the largest agricultural producers in the world. Instead, the system helps maintain thousands of independent, small Canadian farms — particularly in Quebec and Ontario — rather than allowing the industry to consolidate into a smaller number of massive operations.
Consumers reap the benefits too. Retail prices are better protected from shortages and sharp price swings that can happen in less-regulated markets.
Canada’s 2022 avian flu outbreak saw egg prices rise 10.8 per cent. But a coordinated supply-management response helped avoid severe shortages. Compare that to the 2025 U.S. outbreak when avian flu disrupted production and retail egg prices jumped 21.9 per cent.
Supply management allows Canada to maintain its food sovereignty. When grocery-store shelves are full, that doesn’t sound like a big deal. But relying on imports creates big problems when borders close, supply chains break down, or countries decide to prioritize their own consumers.
Then there’s quality. Canadian milk is produced under Canadian rules governing food safety, animal health and production standards. Supporters argue that maintaining a strong domestic dairy industry gives Canadians greater confidence in where their milk comes from and how it was produced.
That all being said, sometimes you just want a proper Gouda from the Netherlands or a sharp American cheddar. No problem.
Supply management doesn’t ban foreign dairy products outright — it simply limits how much can enter under existing trade agreements.
Trump can’t stand it, so now he’s accusing Canada of discrimination by letting its retailers directly import cheese from the European Union (EU) under the Comprehensive Economic and Trade Agreement (CETA) quota, but not American cheese under the comparable Canada-United States-Mexico Agreement (CUSMA) quota.
But CUSMA and CETA are entirely different agreements that were negotiated separately from each other. Having different rules between different treaties isn’t discrimination. The U.S. and the EU each negotiated their own deals fair and square.
It’s true — supply management is a trade-off. There might be less competition. And in return we get stable prices, more domestic production, and predictable supply.
But if we get rid of it, Canadians might not see its value until long after it’s gone.
You’ll see lower prices when it’s gone
Supply management might keep our dairy farmers happy, but Canadians pay for it every time they visit the dairy aisle.
Canada doesn’t outright ban foreign dairy products. It uses quotas to restrict how much gets imported at favourable tariff rates, which largely protects Canadian farmers from aggressive foreign competition.
But fewer imported products competing for shelf space in Canadian stores means we end up paying higher prices than we would in a more competitive market.
Back in 2000, Australia removed its dairy supply management policies. According to a 2007 report written by Australian economist David Harris, milk prices received by farmers initially fell by 35 to 40 per cent after deregulation.
Supply management also limits Canadian exports to other countries. Instead of satisfying just the domestic market, shouldn’t Canada’s farmers be allowed to sell as much cheese, butter and milk as they can overseas?
The Fraser Institute says exports account for more than 30 per cent of dairy production in Australia and about 20 per cent in New Zealand, compared with less than one per cent in Canada — despite Canada’s larger economy and population.
And that brings us to the elephant — or cow — in the room: our trade relationships.
Canada has repeatedly clashed with major trading partners over dairy products. The U.S. challenged Canada’s administration of its CUSMA dairy quotas, while New Zealand pursued a separate dispute over the same issue.
Canada won the most recent U.S. CUSMA case, while Ottawa and New Zealand reached a resolution in 2025.
But the U.S. won’t stop bringing it up, and dairy has once again become tangled up in the much larger, ongoing Canada-U.S. trade negotiations.
The C.D. Howe Institute suggests that defending our dairy market risks letting one agricultural sector interfere with the bigger picture. At some point, we should ask whether continuing to defend the current system is worth what we give up in return.
None of this means Canada should simply throw our dairy farmers to the wolves. Farmers would have to be compensated during the transition. Australia introduced programs to help producers adjust or leave the industry when it deregulated dairy.
According to Harris, Australian farmers came out stronger . They managed to adapt to the new market conditions by improving their output and becoming more efficient. In other words, deregulation created new opportunities for growth.
Meanwhile, in Canada, inefficiency remains supreme.
Despite having larger herds on average, dairy farms located in the Prairie provinces accounted for only 16 per cent of Canada’s dairy production in 2025. But Quebec accounted for 37 per cent of production, where the herds are half the size and less efficient.
The Macdonald-Laurier Institute explains that quotas are assigned by population, so Quebec and Ontario receive the largest quotas, while Canadian consumers are “paying higher prices to subsidize small, inefficient Quebec dairies.”
Supply management protects our farmers from foreign competition. But it also means higher prices, less consumer choice, fewer opportunities to build a global dairy-export industry and one more thing to fight about whenever Canada sits down with its trading partners.
It’s about time Canada asks itself: Is the milk really worth the squeeze?
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