What is the supply management system?
Supply management in Canada’s agricultural sector
Any industry, from car manufacturing to shoe factories, tries to establish the best possible balance between supply and demand. Farm producers try to do the same thing through supply management. They manage their production so that it will align with the demand forecasts for their products. In a supply management system, demand is forecast by means of calculations, and production signals are sent out to producers based on the demand forecasts that are obtained this way.
Costly surpluses can be avoided by controlling production effectively. Surpluses occur when the total market demand is lower than production, resulting in storage and disposal costs.
Supply management is more complex in the agricultural sector than in many other sectors, mainly because of the very large number of producers. Weather and other unpredictable factors also affect production cycles. However, the stability of markets and sales revenues is extremely important because of the amount of planning and investment needed to ensure that production is effective and that markets are being supplied consistently.
The three pillars of supply management are:
- National production planning;
- Price administration;
- Import controls.
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