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Dairy farming is one of the largest agricultural sectors in Canada. Dairy has a significant presence in all of the provinces and is one of the top two agricultural commodities in seven out of ten provinces.In 2016, there were 959,600 dairy cows on 11,683 farms across the country. Quebec and Ontario are the major dairy producing provinces with 49% and 33% of the farms, respectively.^[2] The Canadian dairy sector contributes roughly $18.9B yearly to Canada's GDP, and sustains approximately 215,000 full-time equivalent jobs.

In Canada, dairy farming is subject to the system of supply management. Under supply management, which also includes the egg and poultry sectors, farmers manage their production so that it coincides with forecasts of demand for their products over a predetermined period - while taking into account certain imports that enter Canada, as well as some production which is shipped to export markets. Imports of dairy, eggs, and poultry are controlled using tariff rate quotas, or TRQs. These allow a predetermined quantity to be imported at preferential tariff rates (generally duty free), while maintaining control over how much is imported. The over-quota tariffs are set at levels that allow Canadian farmers to receive a price reflecting the cost to produce in a northern environment.

The government of Canada put in place a supply management system in the early 1970s in an effort to reduce the surplus in production that had become common in the 1950s and 1960s, and ensure a fair return for farmers.In 1970, the National Milk Marketing Plan came into effect to control supply, with the federal government and the governments of Ontarioand Quebec, the two largest provinces, signing on. By 1974 every province except Newfoundland had signed on. Following dairy, a national supply management system was implemented for eggs in 1972, turkey in 1974, chicken in 1978 and chicken hatching eggs in 1986.

The basic idea behind supply management is to manage production so that supply is in balance with demand, and the farm gate price enables farmers to cover their costs of production, including a fair return on labour and capital.Each farm owns a number of shares in the market (quota), and is required to increase or decrease production according to consumer demand. Because production is in sync with demand, overproduction is avoided; this enables farmers to earn a predictable and stable revenue, directly from the market.Supply management is a shared jurisdiction between the Federal and Provincial governments. For example, on a Canada-wide basis, there is the Canadian Dairy Commission, composed mostly of dairy farmers. In Ontario, there is the Dairy Farmers of Ontario, with similar local boards in each of the other provinces

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