Last updated on January 9, 2011
Danielle Landreville, an egg producer in Sainte-Mélanie, Québec was given a reminder by the Québec Ministry of Agriculture and the Québec Federation of Egg Producers that she would be fined C$2,250 ($2266) if she kept giving away some of her farm’s eggs to food banks during the holidays (article in French here).
The Ministry of Agriculture enforces a policy of supply management which aims at artificially raising the price of eggs on the market. The eggs produced by most of Mrs. Landreville’s 36,000 hens eventually hatch chickens. She gives away the eggs which she knows cannot hatch as consumption eggs.
According to GO5, a Québec “coalition for an equitable agricultural model: supply management,” there were 44 farms such as Mrs. Landreville’s in Québec in 2006, representing a total of about 200 million eggs — about 27 percent of the Canadian market — per year.
Consumers Pay Twice
Unless the demand for that commodity is perfectly elastic (which is unlikely for whole eggs, a commodity that has few substitutes), this means that the price of the commodity whose supply is managed increases. This price increase is borne by egg consumers. Because Mrs. Landreville’s “consumers” are the farms raising broiler chickens, part of the price increase is passed on to the consumer of broiler chickens.
There is another, more subtle way in which consumers end up paying more under supply management. Supply management of agricultural commodities is equivalent to giving agricultural producers a subsidy. Eventually, this subsidy leads to too many producers being on the market with respect to the number of producers who would be able to operate at a profit without such subsidies. Such subsidies are partly paid for by consumers via their tax bills, so that consumers end up paying twice for supply management policies.
In 2006, there were 44 farms in Québec producing broiler eggs, and there were 103 farms producing consumption eggs, all under a supply management scheme.
If I were a gambling man, I would bet a substantial fraction of my annual salary that there were more than 44 consumers of broiler chickens and more than 103 consumers of eggs in Québec in 2006.
(HT: @Liberte_Quebec)