The Canadian Cheese Cartel

April 2, 2018

Canada has a cheese problem.

Back in 1970, dairy farmers convinced the Canadian government to enact something called the “National Milk Marketing Plan”. This regime greatly restricted the production and sale of dairy, creating a cartel. The goal was to increase dairy prices in Canada – because who doesn’t like high prices? However, in the 48 years since the cartel was established, something strange has occurred: we’ve had high prices.

How expensive is cheese in Canada, you ask? Well let’s consider pizza, everybody’s favourite cheese delivery mechanism. There’s a big nationwide chain here called Boston Pizza that sells, among other things, pizza. A large pepperoni pizza at Boston Pizza is $30.28.

At Pizza Hut in the US, they currently have a deal on where you get a large pepperoni pizza for $7.99. That is less than $30.28 – even after health insurance premiums.

Now, would I recommend paying $8 for a Pizza Hut pizza? No. Would I recommend paying $30 for a Boston Pizza Pizza? Also no. Should we be eating pizza in the first place? Well, yes, pizza is delicious. As is cheese – but it’s slightly less delicious in Canada, because it’s god damned expensive.

It’s so expensive, in fact, that pizza places estimate their daily food cost with a single number: Cheese Cost. My brother used to work at a pizza place here, and the manager only wanted to know two numbers at the end of the day: revenue, and Cheese Cost. Meat? A rounding error. Vegetables? Irrelevant. Show Me The Cheese.

With these cheese prices, you would expect a healthy import market. Except not, because dairy tariffs in Canada are 245.5%. That is to say, if you want to import a $4.99 block of sharp Tillamook Cheddar, it will cost you $17.27 after import taxes. Surprisingly, there ain’t a lot of sharp Tillamook Cheddar here.

Still, the cheese must flow. A few years back, some clever pizzeria owners noticed a loophole in Canadian customs laws. While there is an obscene tax on importing cheese, there was no such tariff on importing “food preparation items”. In 2011, the border lines swelled with restaurateurs filling their cars with Costco pizza kits. These kits contained highly sought-after mozzarella cheese, conveniently packaged with pepperoni and pizza crust. Once these bootleg kits got into Canada, the cheese went right onto freshly made pizzas, and the pepperoni and crust went right into the trash. Restaurant margins 1, a functional system of trade 0.

While that loophole has since been closed, our whackadoodle dairy controls continue to cause grief of an international scale. Canada’s largest trading partner, for example, was recently taken over by a feral animal of some sort, resulting in a dispute over free trade. While most of the “reasons” for the trade dispute amount to flaily nonsense, our dairy cartel is rightly a point of contention.

America, Europe, and the world all want to offer Canadians great cheese at reasonable prices. Yet 12,965 dairy farmers are holding our nation hostage. They have created a world where a milk production quota costs $35,000 per cow, and a restaurant can charge $30 for mediocre pizza and stay in business. They have used lobbying and cheesy cheese ads to lull us into submission, and as a result, have reduced the availability of cheese in this otherwise fine country.

This cartel causes there to be less cheese, and that is a crime.

Or at least, it should be.


Update, April 3

Folks have been writing in to inform me that comparing Boston Pizza’s regular prices with Pizza Hut’s sale prices is not an equivalent comparison – which is true, since Pizza Hut is garbage and Boston Pizza thinks it’s people. So as my apology to Canadian dairy farmers, here are some additional facts people have sent in:

  • Milk in Canada costs 2x what milk across the border does, but due to labour costs the difference in bulk cheese is usually less dramatic.
  • USD and CAD are different currencies which fluctuate over time, increasing or decreasing the on-paper price of goods and services.
  • The Canadian dairy cartel generates substantially less profit than the Mexican drug cartel does.
  • Pizza Hut also has sale pricing in Canada.
  • Boston Pizza is attempting to expand to the United States under the brand Boston’s, where they also charge too much for pizza.
  • Whiz is not one of the styles of cheese recognized by the Canadian Dairy Commission.

Update 2, April 13

I have received many additional messages informing me that sarcastically comparing the price of highly divergent pizza vendors does not constitute a scientific evaluation of the international cheese trade. Thank you for your heartfelt messages. Unfortunately I left my Cheese Economics diploma in the car, but if you’d like a more reputable source for the claim I actually make (that the Canadian cheese market is silly), I invite you to read this Globe editorial on the cartel, or this CBC article on a police officer who was arrested for smuggling cheese – for use in pizza.

© Allen Pike. See also Twitter and Steamclock.