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History is poised to repeat itself

by Paul Beingessner
Canadian farmer, writer

(Monday, Nov. 3, 2003 -- CropChoice guest commentary) -- Will wonders never cease! The right wing farm groups and academics in Canada have finally admitted they were wrong when they predicted the results that would occur from the elimination of Canada's grain transportation subsidies in the mid-1990s. It was expected that getting rid of the Crow benefit, which provided as much as $720 million in rail freight subsidies per year, would increase livestock production, cause crop diversification and lead to lower subsidies in other grain producing countries. The prediction was that this would bring an era of prosperity in western Canada.

A conference in Winnipeg recently examined the legacy left by the death of the Crow. The unavoidable conclusion was that the losses have generally outpaced the gains.

True, there has been an increase in hog production and in the size of the beef herd, but this has hardly turned out to be a panacea for prairie woes. Hog production has increased across North America and prices have remained chronically depressed. The hog industry expanded largely with invested money from retired farmers and provincial governments. Without this equity, the industry would have collapsed some time ago. Now the collapse can be expected when investors tire of the empty promises.

Beef production also expanded, but remains very vulnerable since most of the increased production goes to the U.S. Mad cow disease may have put a crimp in the cattle industry in Canada, but if we successfully weather this storm, there is another looming on the horizon. This is in the form of country-of-origin labeling or COOL. American farmers are currently enjoying the highest cattle prices in history. Having seen the positive effect of even a small reduction in supply, they will be emboldened to do whatever it takes to keep Canadian cattle out, or at least reduce their numbers.

Crop diversification also occurred as a result of the loss of freight subsidies. Farmers switched, to some extent, to lower producing but higher value crops like pulses. While these have been useful additions to the prairie arsenal, prices for many of these crops have also fallen as production has risen. Supply and demand rears it ugly head again.

The most dismal disappointment of the Crow's demise was in the failure of other exporting countries, like the EU and U.S. to drop their subsidy programs. While direct export subsidies have been reduced, domestic subsidies have kept production high in these countries. An increase in exports from up-and-comers like Brazil, Argentina and the Former Soviet Union countries has ensured that world prices for cereals and oilseeds remain in the tank.

Even brief surges in feed grain prices for use in the feedlots and hog barns of western Canada are quickly quelled by imports of the amply produced American corn. If you consider prices, the world would appear to be awash in food and feed grains. World stocks do not show that, but market mechanisms increasingly seem to ignore the reality of stocks.

Eight years after the Crow was shot down, the legacy is significantly lower net farm incomes in western Canada. The hog industry, in which all the small players have been driven out and the large ones languish in the doldrums, requires rock bottom feed grain prices just to break even. The cattle industry, the bright spot for some years, has proven to be highly vulnerable since it is so dependent on the willingness of a sometimes-unwilling America to accept our surpluses. Many other diversification options, bison, elk, ostrich, emu, deer and so on, have proven to be nothing but debt traps and have finished off many farmers.

Perhaps worst of all, having been able to terminate the Crow, the Canadian government came to believe that it could get away with ignoring the problems in agriculture. All we have had since the Crow has been half-baked programs designed to convince the urban public that those complaining farmers are getting more than they deserve.

Now the same people that demanded the end of the Crow and predicted that Nirvana would result want farmers to believe that getting rid of supply management in the poultry and dairy sectors will bring benefits to other Canadian farmers. Access to foreign markets will improve and exports will increase, they say.

The history of the Crow tells us foreign markets and countries have not been kind to Canadian farmers when they give up such programs. One sure result of the end of supply management would be to plunge poultry and dairy producers into the pit the rest of farmers seem poised to inhabit for eternity. How can anyone think that is a good thing?

(c) Paul Beingessner (306) 868-4734 phone 868-2009 fax beingessner@sasktel.net