The Farm Support Dilemna

Commentary, Agriculture, Robert Sopuck

What can we do about the perpetual crises that afflict grain and oilseed farmers? Prices are low and the competitive pressure from low-cost foreign producers is growing. When our dysfunctional grain transport system, their superior production technology and higher subsidy levels are added to the mix, it’s a grim picture.

The U.S. and Europe vastly outspend Canada when it comes to direct farm supports, ostensibly to protect rural communities. The question must be asked; have those astronomical levels of farm supports — the Common Agricultural Policy of the European Union accounts for half of their entire budget — worked? The answer is no and here’s why.

Government spending per capita in the U.S. Great Plains, primarily in the form of farm support payments, is the highest in the entire country. Yet, in spite of unprecedented levels of farm supports, the largest declines of rural populations in the U.S. in the 1990’s were in the Great Plains. Farms got bigger and populations got smaller.

In the U.S. 20% of farms, the largest farms, receive the lion’s share of those subsidies, about 80%. This support bids up the price for adjacent land making it difficult for new farmers to start up. Farm subsidies get “capitalized” into land values and the price of land is ratcheted up beyond the level it would reach in a free market. As one large North Dakota farmer noted in a recent issue of “The Economist” magazine, “Profit margins are good but the community has gone.”

What does this mean for agriculture in Western Canada, where the same process of rural depopulation is taking place? For one thing, our dreams of unsubsidized exports from competing countries will never materialize. An iron law of politics is that “All politics is local.” Powerful local interests are able to exert pressure on their elected representatives to continue the level of these supports. If the tables were turned, would we care about farmers in Europe and the U.S? Probably not. We cannot count on the U.S or Europe to reduce export subsidies. We must adapt to these realities and come up with our own solutions.

Our crop insurance, NISA, and periodic weather-related disaster payments are likely to stay in place, as they should. But we can’t out-subsidize American and European treasuries. Why not look at the entire rural economy and focus on “family farm net income” from all sources. Small farms can survive if they have multiple sources of income and enhancing rural incomes, from all sources, should be the policy focus.

One approach to farm support that the U.S. and Europe have used for decades is paying farmers for conservation. In return for enhanced farm support, farmers agree to provide “environmental services” from their farms. Environmental resources like wildlife or water are public property and farmers should not have to bear all the costs of conserving them. Keystone Agricultural Producers, Manitoba’s largest farm group, is promoting the idea. Labeled “Alternate Land Use Services,” this approach would give farmers incentives to provide things like clean water, wildlife, and carbon sequestration to a public that wants those things.

This is a farm support program that, coupled with rural diversification and value-added industries, might actually work. It helps families stay on the farm by contributing to the common good, a subsidy that makes more sense than paying them to produce less.