The Three Pillars of Supply Management
How producer pricing, production discipline and import controls help to make this system run smoothly.
The Canadian Dairy Commission sets the price of milk based on how much it actually costs to produce. They factor in capital and labour costs, and take into consideration the state of the Canadian economy.
Canadian dairy production must equal the demand from consumers. Production discipline helps avoid overproduction and provides security for farmers, allowing them to invest their profit back into their farm.
Tariff rate quotas (TRQs) allow a preset quantity of milk to be imported at a preferential rate quota. Not having any import controls can lead to overproduction and instability within the system.