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History is poised to repeat itself
by Paul Beingessner
(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 | |
