Real Farm Aid

Commentary, Agriculture, Frontier Centre

The Family Farm Tribute staged January 16 in Toronto in reaction to the agricultural crisis was well intentioned but disturbing. Is charity to be the lot of the proud, independent farmer?

Agriculture Canada reports that net receipts in 1999 declined from their five-year average by 11% in Alberta, 21% in Manitoba and 34% in Saskatchewan. Just in case you think Ronnie Hawkins, Fred Penner and their friends can make up the difference, this translates respectively into: $73 million, $73 million and $278 million. It’ll take a lot of concerts to raise that kind of dough.

The income collapse in Manitoba and Saskatchewan was weather-related and didn’t affect farms outside the heaviest rain zone. Still, many farmers are caught in a continuing rationalization and adjustment process as enormous productivity gains in seed and ag technology work through to lower prices. For these few, change has meant tough decisions. For the many, on the other hand, it means our food dollars go farther.

In the early 1900s, most of the population worked on farms. In 1960, 11.5% of the people tilled the land. Today, that figure is under 3.2% and falling rapidly. Operations continue to increase in scale as fewer people produce more output. The family farm will continue to disappear and prices will continue to decline. These trends are unstoppable. No government will be able to afford to keep Canadian agriculture the way it is, and marginal operators will continue to leave the land. The federal Liberals are entirely correct in their reluctance to dole out new wads of temporary farm aid.

European governments have doggedly maintained heavy subsidies in the face of the productivity revolution in agriculture. They are futilely delaying the adjustments that must come, while creating huge artificial surpluses that have dragged world prices down.

Canadian farmers have not lagged behind in attempting to cope. One of their responses has been to create "new generation co-ops", which seek to increase member incomes by adding value to the raw farm product. Farmers own capital shares in these organizations based on how much of their raw product they individually contribute to the common enterprise. In the Prairie tradition of mutual aid, hundreds have joined up. Many have sprung up on both sides of the border to operate large milling operations and even a bison slaughter plant.

But our governments can help these moves to diversify into more profitable and sustainable activities further by loosening or removing the deathgrip old, established regulatory institutions have on positive adjustment in the farm industry. With low feed costs and highly productive farmers, Manitoba has major opportunities to develop its food processing sector. How do we overcome the institutional blockages that keep the grain sector in the low profit, commodity business of exporting raw grains?

This refers partly to the Canadian Wheat Board, as we now know it. The Board’s monopoly puts formidable hurdles in the path of farm profit and diversification. Farmers are not allowed to do anything with their grain but sell it to the Board at a dictated price. If anyone wants to do something else with it, he has to buy it back from the Board at a much higher price — even though it never leaves his silo. What the CWB did to a co-op made up of farmers from southeast Saskatchewan and southwest Manitoba would have made Louis XIV proud.

The farmers, organized as Prairie Pasta Producers, tried to set up a pasta plant, but their months of effort crashed right into the state-erected pricing hurdle. When this small co-op went to the Board and asked for a change in the pricing rules — their venture would not be profitable with this needless overhead — they were turned down. One retired Wheat Board luminary said, "They tossed them a popsicle stick." The Board explicitly stated these farmers might make more money per bushel on their wheat than other producers, and that was against the rules.

The would-be entrepreneurs then mentioned the small number of family milling operations that have set up and are allowed to process their own grain without interference. The Board’s response? They hadn’t intervened because they didn’t consider the mom-and-pop operations a threat. They weren’t large enough to be viable. In other words, you’re allowed to break the rules unless you have too much potential.

Prairie Pasta Producers will build a mill, but it’s likely to be located in North Dakota. The new-generation co-op behind it has members on both sides of the line, although the overwhelming majority is Canadian. To add salt to the wound, the Wheat Board is apparently considering a proposal to set up another pasta plant. Overseas.

Farmers don’t need handouts and charity concerts. They need what a small "old guard" minority refers to frequently as "rigid economic dogma", a.k.a. intelligent public policy.