Discussion group on harvesting subsidies

Don Cayo
The Next City
December 21, 1996

Discussion

Poor Countries like to maintain cheap food policies by scandalously underpaying their dirt-poor farmers. Canada, with a curious logic found only in the most sophisticated economies, maintains a cheap food policy by overpaying for farm products grown here. And not just by handing out subsidies or by rewarding some farmers too richly for their work. We also overpay by fostering and supporting counterproductivity — everything from grossly inefficient grain transportation, to overspending on farm capital, to growing the wrong things in the wrong places.

Our cash-strapped governments are scrambling to pull the plug on direct subsidies, nearly $4 billion a year by the time international trading agreements started forcing them down. Indirect subsidies are also tumbling. Internationally, there’s pressure for freer trade in agricultural commodities, and domestically, there’s agitation for lower prices and greater freedom to produce. These chip away at the power of marketing monopolies to extract premium prices, which cost consumers almost as much as subsidies ever did. But well after these subsidies disappear — for years, if not decades, to come — we will be bearing the untallied cost of the inefficiencies, which may be the highest cost of all.

Still, you can argue — and many supporters of interventionist farm policies do — that food is cheap in Canada. The best evidence supporting the case is found in fields and barns. Modern Canadian farmers routinely work wonders, extracting more from less. Better fertilizers, better pest control, better genetics and better management — crop yields per acre have more than doubled in the last four or five decades, and they continue to increase. Livestock grows to market weight on a fraction of the feed once required. With a combination of better grain yields and better animals, it takes only a fifth as much land to support a barnful of chickens as in 1951. And the land base to sustain the Ontario hog industry has shrunk to half the acreage of 45 years ago, even though 50 per cent more pigs are yielding twice as much lean meat.

Defenders of the agricultural status quo like to boast that Canadians spend less than others to feed themselves. In China, they note, 1.2 billion people spend well over half their income on food, and Mexicans nearly a third. In developed countries, the Japanese spend about 20 per cent, and the French almost as much. And Canadians? Just 15.5 per cent — down from well over 20 per cent when baby boomers were young. Farmers, processors and politicians who argue that our food is cheap also point to grocery store shelves. With a few exceptions — notably milk, chicken, turkey and eggs — our domestic food prices rival those in the United States.

The productivity gains are real. But they’ve been undermined and devalued by politics — decades of ill-conceived policies that skew who grows what where. And even without the exceptions, the comparisons don’t mean much. China’s average household income is less than one-fiftieth ours, Mexico’s less than one-thirtieth. Most people in these countries are poor. Of course they spend a higher percentage of their incomes on food — many have zero per cent left for luxuries, which most Canadians consume with abandon.

On the surface, the Japanese and French analogies are more to the point. Both these countries have family incomes 10 or 20 per cent higher than ours, which implies that their food should require a lower, not higher, percentage of income. But Japan is heavily dependent on food imports; it’s no surprise that groceries there cost more. And France, though chock full of farmers, is a member of the European Union. Its food policies are so screwed up by the EU’s Byzantine, internecine politics as to make intelligent comparisons impossible. Besides, everybody knows the French eat better than we do.

The comparison with U.S. grocery store prices doesn’t tell the whole story either. First, don’t imagine Americans pay the full cost of their food at the checkout, or that public policy doesn’t influence their prices. At the start of the free trade era, when Canadians were overpaying their farmers $6.8 billion a year in either direct subsidies or inflated prices, Americans were overpaying $78.5 billion. They’re still at it. One Washington trick is to pay farmers not to seed land, a direct handout that prevents the buildup of surpluses that would drive prices down. The U.S. government also buys a lot of surplus production — milk for school lunch programs, for example. Again, that’s both a transparent subsidy and a hidden price support.

Second, we Canadians don’t yet pay our whole food bill at the grocery store, and today’s farmers have yesterday’s tax dollars to thank for a rich legacy of land cleared and improved, of buildings built, and of crops and livestock enhanced through research. Farmers are beginning to pay for once free health inspections, but governments still cover half the cost of crop insurance or other risk-reducing programs. And in most rural areas, many services — roads, electricity, telephones, police and fire and ambulance networks, and more — aren’t fully supported by local fees or taxes. The total is impossible to tally. In some cases, like the research that hugely reduces the cost and improves the quality of Canadian farm produce, the spending may be easy to justify. But these costs are nevertheless real, part of the price Canadians pay for food.

Third, don’t forget those exceptions — milk, chicken, turkey and eggs. Dairy and feather farmers are the coddled kings of Canadian agriculture, their industries responsive only marginally to the law of supply and demand. They are supply managed — a euphemism for what is in effect a closed shop that bars all competitors, nationally and internationally, and manipulates prices to its members’ advantage. The consequence is uncompetitiveness and supermarket prices that are consistently higher — at least 10 per cent and often 30 per cent or more — than in the United States.

The tax burden to support direct and indirect subsidies may be reasonably well shared by Canadians, but artificially high prices are another story. Overcharging inflicts an onerous tax on the poor to boost prices for poultry, eggs and milk — all dietary staples. There’s no denying that the relative cost of food is modest for middle-class Canadians, and it’s minuscule for the rich. But grocery shopping strains the pocketbooks of people sustained by welfare or marginal jobs. A struggling single mom in Toronto or Montreal has two choices: She can overpay to further enrich the poultry and dairy farmers with those fine brick houses and sprawling barns that dot the rural landscape in Ontario and Quebec; or she can see her children go without foods vital to a nutritious diet.

The same policies that ill serve consumers provide, at best, only short-term support for farmers, and they foster long-term problems now coming to the fore. Many farmers were encouraged into activities without a sufficient land base to sustain production. As governments’ support for agriculture wanes, many who responded to irrational policies of the day now find themselves mired in debt, realizing that they’re growing the wrong things in the wrong way in the wrong places. Those in coddled industries that grew up inefficient find their high prices bar them from markets, domestic and foreign.

And rural communities are paying a bigger price still.

I saw that price firsthand last summer as I toured my home province of New Brunswick, my natal Saskatchewan and the rich farm belt of Southern Ontario. I came home convinced that interventionist policies fail both consumers and farmers, not to mention governments’ own regional development aspirations. The case is irrefutable: The best cheap food policy would leave the business of farming to farmers.

THE PATCHWORK QUILT OF THE PRAIRIE GRAIN BELT HAS CHANGED color since the days of my youth. There’s a lot more yellow — we used to call it rape when a few leading-edge farmers began planting it in the 1960s, but now it’s canola. There’s more pale blue flax — another lucrative oilseed. There are more shades of green, reflecting a wider range of feed grains and rotation crops. And there’s virtually no black — the tilled-clean summer fallow that farmers of my father’s generation were convinced was essential to good husbandry.

This is a picture of bounteous farming developments this decade — a growing diversity that’s good for the land and good for the farmer’s bottom line. But something is missing from this picture. People. Houses. Even small towns. They aren’t there in the numbers I remember. This isn’t faulty memory; these are real blank spots, and they represent the failure of farm policy.

What a contrast with New Brunswick where small towns abound, and homes are strung in ribbons along countless kilometres of country roads. The Maritimes economy is booming nowhere, but rural New Brunswick sustains a modestly increasing population. Some work in forestry; some commute to town, as rural dwellers do in every part of Canada. But a surprising number work in farm-related jobs: Manufacturers process 86 per cent of the province’s agricultural products to substantially higher value. Each job in the field generates nearly seven jobs off the farm.

A success story? Not entirely. Too much of my little province’s agricultural potential lies fallow. We plant just 55,000 acres of potatoes each year, a little more than that in the rotation crops required to give potato soil a break, and quite a lot less in blueberries, our second-biggest agricultural export. We produce just enough milk and poultry to feed all 760,000 of us. And we produce a small fraction of our other meat and vegetables.

Saskatchewan, on the other hand, has all kinds of agriculture. Grain or oilseeds or forage grows on about 50 million acres — nearly a thousand times more land than New Brunswick has seeded to potatoes. For most of Saskatchewan’s history, tending that much cropland took well over 100,000 farmers — the peak was 142,000 in 1936. Today, farms employ a mere 60,000, many with day jobs and many more with spouses who work off the farm. Worse from a rural development perspective, Saskatchewan ships its produce unprocessed; Prairie agriculture provides a comparative handful of off-farm jobs. So, as farms get bigger, neighbors become more distant. With nothing to do until Dad retires, working-age sons and daughters drift to the cities, most never to return. Small towns with schools and rinks and little business districts that once thrived thanks to local farmers’ custom now fade from the map — and from the landscape.

These two very different problems — underdevelopment of agriculture in the Maritimes and underpopulation of agriculture-rich areas of the Prairies — were exacerbated, if not caused, by a single set of federal farm policies: grain transportation subsidies that have, over time, diverted billions and billions of tax dollars from the city to the country without doing anyone any good.

FEED FREIGHT ASSISTANCE, A SUBSIDY PROGRAM that provided farmers with $14 to $18 million a year, ended last year. It was supposed to help Western and Central Canadians sell their grain while benefiting Maritime livestock operators who didn’t grow enough of their own. It did. But, along with the $700 million Crow rate subsidy that helped Prairie farmers ship grain abroad, it also did some other things.

In the Maritimes, Feed Freight Assistance created huge dependency on imported feed. Cheap imports fuelled the creation of fairly large chicken, turkey and hog operations on farms with nowhere near enough land to sustain them. The farmers can’t grow the food their animals require — most don’t grow any — and they can’t productively dispose of the manure. They’ve prospered, till now, thanks to subsidized grain and, in the case of poultry, the supply-management system that limits production within the province, bars competitors from outside, and bolsters the selling price. With feed costs currently at a record high worldwide and the simultaneous loss of the subsidy, turkey growers are faltering in New Brunswick. Their industry is likely to fail. Dozens of big barns that grow 3.2 million kilograms of turkey a year are fated to be boarded up; they have no other use.

Chickens and hogs — perhaps even dairy and beef cattle, which get some of their feed from local forage — could be next if farmers can’t get a nearby supply of grain. Whether New Brunswick would have as many farm animals without the subsidies is unknowable, but it’s a safe bet that those we had would have been fed our own grain.

Today, New Brunswickers grow only 30 per cent of the grain that feeds our livestock, and we have only half enough livestock to feed ourselves. With more grain fields, we’d have a stronger meat industry. As a byproduct, we’d also strengthen our potato farms, which take a terrible toll on the soil. Year after year of the same crop creates a haven for pests that only chemicals can kill and sops up nutrients that acidic fertilizers only partially replace. Big tractors and harvesters beat the soil up and smash it down, pack it solid and plough it loose. Then, the final indignity, rain and melting snow wash away granules that, over time, add up to cubic metres of lost rich silt.

New Brunswick potato farmers have seen their counterparts in neighboring Maine abandon 40,000 acres of once productive land, now essentially mined of its life-giving properties. They’re fighting to save their own soil with a host of techniques: new chisel ploughs that just scratch the surface; erosion-foiling terraces; cover crops left over the winter, tilled under in the spring; strip crops of alternating potatoes and grain. Crop rotation, which fights erosion and the buildup of pests, is used too. But not enough. The ideal rotation is three years according to some experts, five according to others. In New Brunswick, farmers average slightly better than two.

This skimping has more to do with dollars than sense. Potato farmers know they must rotate, especially with grain, the ideal alternative. But with cheap Western and Ontario imports flooding in, planting grain hasn’t paid. Now it might. Since Feed Freight Assistance ended last year, Maritime farmers are eyeing land to clear. There’s lots available. Not only could they grow more high-value potatoes, they could also ease the strain on their overworked land. New grain crops grown during the off years could feed their neighbours’ chickens and pigs. In a few years, who knows? Maybe New Brunswick could start feeding New England, a rich market at our doorstep whose high land and labor costs should make Canadian meat competitive.

Grain transportation subsidies affected farming out West differently. Massive cash infusions certainly propped up grain growers in Saskatchewan, Manitoba and Alberta. But their communities suffered. With so much grain shipped raw, neither processing nor other secondary industries ever gained much hold. How could they? Grain was so cheap to ship, it made sense to wait till it was in a big population centre before milling it, baking it or turning it into pasta and pies. So, along with millions and millions of tonnes of grain, Saskatchewan and its Prairie sisters also shipped out thousands and thousands of jobs.

With transportation subsidies now gone, it makes sense to do something with Prairie grain close to home — even just feeding it to livestock. A pig barn, for example, yields a higher-value, lower-bulk product, which can be shipped economically to consumers in a distant city. Farmers can make more raising pigs than just growing grain, and their neighbors can find jobs milling feed or processing meat. The loss of Feed Freight Assistance and the Crow rate subsidy also puts an end to a false economy that paid farmers to grow grain in places they otherwise wouldn’t. Cattle — even bison, which are marvelously adapted to the Prairie terrain and climate — are once again appearing on marginal land that never should have grown grain and never would have if farm decisions had been driven by economic realities rather than political ones.

I EMBARKED HEAVILY LADEN ON MY 11,000-KILOMETRE ODYSSEY to research this piece and a related series for the newspaper where I work. My little Volkswagen carried more than just me, clean clothes, my laptop and briefcase abulge with background reading. I also took, as usual on assignment, a little store of previous knowledge to chew on while travelling and a mixed bag of preconceptions and predilections.

It’s a stretch to call me a farm boy, though my roots extend to Saskatchewan’s grey bush soil northwest of Prince Albert. I was only three when Dad sold our tiny house, rented out the land and steered the family urban-bound via a series of short stays in small towns. So I grew up only somewhat citified and with an affection for farm life based on spotty early memories and a lingering fondness for country kith and kin. Balance that with the skepticism and penchant for analysis that come with my career. Not to mention the self-interest of the private me, a price-weary taxpayer and consumer. I’ve written volumes about public policy in Atlantic Canada, and I know how government intervention has skewed agriculture and screwed consumers here.

I often rail about the stunting effect of western grain subsidies on New Brunswick agriculture — it’s a mini-crusade on the editorial pages I edit. But my rants were always softened, in my head at least, by the supposition that all this public money must be helping somebody, somewhere — perhaps an old friend or extended family member back on a Prairie farm.

It would be nice to affect an authoritative air that implies I’ve always understood all the drawbacks of farm policies. But I haven’t. Until I chanced by a meeting of groups representing all manner of Manitoba producers, I had no idea that grain transportation subsidies had hurt the Western economy as badly as the Maritimes, probably worse. I expected the meeting to be peppered with long-faced mooning about salad days gone by; I found clear-eyed analyses of future opportunities. Days later, when I reached Saskatchewan, I found the same thing.

I set out knowing that easy money — handouts — foster inefficiency. But until I sat down at the kitchen table with Hubert Esquirol, an anti-interventionist farmer in Northern Saskatchewan, I didn’t know the whole sorry story of the railways. Twenty-six thousand rail cars, Esquirol tells me, worth $70,000 each — a $1.8-billion fleet — sit idle 87 per cent of the time. Prairie grain en route to Vancouver averages nine kilometres an hour. That’s the speed of a farm tractor tilling a field, just a little faster than most people’s brisk walk. And some spur lines cost more to operate than the value of the grain they carry.

I knew about the mixed legacy of the trend to fewer, bigger farms in every part of Canada. I knew some retirement-bound farmers had sold out joyously for good prices, while others, swamped by debt, walked away with nothing. But until I lunched with Linda Haverstock in Saskatoon, I didn’t realize the damage caused by easy-money policies that kept many doomed farmers hanging on a little longer. Things were made worse, not better, for the very people they were supposed to help. Haverstock, the former Saskatchewan Liberal leader who quit after caucus disagreements, is returning to practise as a psychologist counselling troubled farm families. She’s horrified at how frequently bad policies and bad advice drag people further and further into debt that can’t avert — that merely postpones — the crunch. When they finally go broke, they’re too old for new careers. “We can’t go back,” she says. “But you have to ask yourself, would it have been better for these people to have faced the music much earlier and not end up with this horrific debt?”

I knew about supply management — select clubs for regulation- and tariff-protected farmers who’ve been granted not only an exclusive right to produce but also the power to keep prices high. But until George Leroux took me on a tour of Coldsprings Farm’s turkey barns, a mini-empire scattered from Thamesford to Tillsonburg in Southern Ontario, I never dreamed that one of these anointed few would chafe at the very things that irk me so. I sought out Leroux because he’s president of Coldsprings, grower of nearly a tenth of Canada’s turkeys. I wanted counterbalance for some of the preconceptions and predilections I left home with; I found reinforcement.

Coldsprings not only grows turkeys, it breeds and hatches them, slaughters and processes them, grows and mills their feed, composts and sells their manure. Supply management is under attack both from would-be competitors outside the country and critics at home. Even if domestic opponents fail, Leroux knows that sooner or later NAFTA or the GATT will tear down those tariff walls. He’s girding for the day Coldsprings goes head-to-head with American growers — not only in Canada, but also in the U.S., if he gets his way. High prices already constrain Canadian poultry producers. Canadians don’t eat as much turkey and chicken as Americans do because it costs too much. Yet, Coldsprings matches all the American production costs, except two. The first is a 2.4-cent-a-kilogram levy it must pay to support collective marketing; the second is the 12.2 cents a kilogram it costs to finance millions of dollars the company has invested in quota — a piece of paper that gives supply-managed farms the right to produce. Leroux is blunt: Coldsprings would do better, and its customers would do better, in an unfettered market.

I knew horticultural growers in Southern Ontario live by their wits as much as by the sweat of their brow. True, they have wonderful soil, a salubrious summer climate and Canada’s richest market on their doorstep. But they must pay the highest farm wages in Canada for labor-intensive harvesting, and their land costs are astronomical, driven by suburban values rather than agricultural worth. Until I chatted with Jay Reesor outside his roadside market in Markham, I assumed he’d envy and itch to emulate supply-managed farmers with their secure incomes and built-in margins to cover every cost of production, no matter how high. Instead, he wants farm monopolies out of his way. Reesor sells all his own produce directly to consumers, including a few dozen eggs a day from his 500 hens. Those eggs are worth more than the few dollars they bring in. They also attract customers who know a Reesor egg is fresh, gathered just the day before it’s sold. Often as not, they also buy something else — his locally famous sweet corn, or beans, or they stay and pick a few strawberries. He can’t, however, add a single hen to his flock; he can’t encourage a neighbor to produce a few dozen extra eggs for his market. He has 500 hens thanks only to a loophole in regulations designed to keep people like him out of the poultry business. He had 14 chickens when he was 10 — or perhaps 10 when he was 14, he can never quite remember without checking the receipt he keeps tucked away to show supply-management snoops who come yearly to count his flock. That history of previous ownership lets him keep 500 birds without any quota. He’d like more layers, and perhaps a few range-fed broilers to attract new customers. And he resents those regulatory walls that have created such a comfortable cloister for insiders, but an impenetrable barrier for everyone else.

The list goes on. From hog farmer Warren Stein I learned just how competitive Canadians can be in a relatively free international market. From ministers and their deputies across the land I learned that, although they’re always careful to voice support for the principle of supply management, they also speak of “changes” their provinces seek — changes so sweeping they sound like a death-knell for the system. Several farmers told me they often don’t invest wisely — they buy or build not because of pressing need, but because government money’s available. Even Nettie Wiebe, president of the National Farmers Union and a pro-interventionist if ever there was one, dislikes the way things were, as well as the way they’re evolving now.

There’s a pattern here. Plenty of people still plead the merits of their own special interests, but nobody looking at the big picture makes a case that it ought not change. The status quo has no defenders.

My list of people ill served by farm policies was getting long. At the top, consumers and taxpayers. We pick up the tab for privilege, inefficiency and bad decisions on the farm. Then add the uncountable, unknowable thousands who don’t have farm jobs in the Maritimes or off-farm jobs in the Prairies because their communities’ growth has been stunted. Add urban Canadians, the millions living in the handful of metropolises whose prosperity is tied far more to the health of their hinterlands than to exploitation of their own nearby resources. Add all the farmers lured into bad investments, whether the ones who built unsustainable and now doomed turkey barns in the Maritimes, or those who merely drove their overhead up a bit with an unneeded building or a piece of equipment replaced before its day was done. Add huge costs to the environment — and ultimately to farmers and all society — from land overstressed and made chemically overdependent by underrotation or growing the wrong things. Add poultry and dairy farmers, most nowhere nearly as prepared for a competitive future as Leroux. Their supply-managed sinecures may have provided some good years, but now they face killer competition from abroad. Add the farmers denied diversification — small ones like Reesor or big ones out West who’d like to feed their grain to chickens or turkeys or dairy cows. Add specialty chicken restaurants unable to match the bargains offered by burger joints that sell unregulated beef. Add millers who must buy through the Canadian Wheat Board and can’t get grain from specific growers they favor. Add every Canadian who feels the effect of lost export opportunities on our balance of trade; every Canadian who works or wants to work in the food industry. Or to eat.

This was really something to chew on during the long drive home. If the complex and costly policies guiding agriculture in Canada serve no one’s long-term interest, how did they come to be? How do we make future policies work better?

SO MANY FAILURES, SO MANY UNINTENDED SIDE EFFECTS — what an indictment of Canadian farm policy. But that’s farm policy, not food policy — an important distinction. Where are consumers’ interests in this? Until recently, at the bottom of the list — if included at all. Even now, only a handful of consumer lobbies — big guys like the Canadian Restaurant and Foodservices Association — are beginning to catch the ear of policy makers and balance the voices of special interests who’ve dominated farm policy discussions in the past. Perhaps we non-farming Canadians were too busy to join the fray, too preoccupied with other priorities. Maybe we were too ill informed. Or too nice.

Grain transportation subsidies in Canada go back to 1897. They were probably needed then. They fuelled settlement of the West, a national priority of the day. That job done, did anyone think about the wisdom of continuing to pay out all that money? Perhaps. But in the following century, no one thought enough about it to halt what became an indefensibly expensive and counterproductive practice. So, too, with other farm supports. They accumulated, one by one, in response to the clamor of special interests espousing special needs — some real, some imagined. Those of us who pay the bills never provided much counterbalance. So inertia ensured that, once a measure was in place, policy makers rarely worried their heads about it again.

And fear of the farm vote ensured that if people in power ever did think about cutting farm subsidies, they’d think twice. Conventional political wisdom has it that farmers control most ridings in the Prairies and nearly half of the ones in Quebec — an odd assumption in a country where a mere two per cent of the people farm. Odd or not, it prevailed. Farm subsidies came to be regarded as untouchable; entitlements became a divine right.

Early this decade, however, the cost cutters swept to power and finally began to butcher these sacred cows. Former transport minister Doug Young pulled the big plug on grain transportation subsidies. Others pulled a lot of smaller ones — a seven-dollar-a-hog subsidy for pigs in New Brunswick, a six-cent-a-litre subsidy on milk across Canada, a plethora of one-shot grants, free inspection services, deficiency payments when prices dip, bail-outs when crops fail.

Squawking about the cuts has been subdued, perhaps because farmers who fear the loss of their traditional perks are too busy defending other fronts. Opponents of both the supply-management system and other monopolies that sell most of our “free market” farm commodities are launching a vigorous wave of assaults. These are producers — still the minority — tackling their own colleagues. They’re Fraser Valley dairy farmers demanding the right to produce butter and cheese and other milk products now supplied to British Columbia by Quebec quota holders; they’re 5,000 moderate Prairie grain farmers and 800 or 900 militant ones who want to break the Canadian Wheat Board’s stranglehold on mainstream grain crops. And, more quietly but perhaps more significantly, they’re Manitoba hog farmers who chafe at being forced to sell their pigs through the province’s hog-marketing agency. This summer, Manitoba became the first government to listen. It allowed its province’s hog farmers to sell outside the board. Most aren’t doing so — at least not yet. But they’re demanding some overdue efficiencies, and they’ll vote with their feet if they don’t get results.

In 1989, the Canadian Wheat Board lost its monopoly on oats, a secondary Prairie crop. What happened was a boon to farmers; the Canadian price has increased relative to the U.S., and marketing costs have dropped by a third. Last summer, a federal review panel recommended that the wheat board lose a little more power. It said farmers should be free to sell up to a quarter of their wheat independently of the board, and the board should lose its monopoly on feed barley, though not on malt. Whether these specific recommendations are adopted is moot. The trend is clear — and so is the pressure for it to continue.

Entrepreneurship is already finding some creative ways around stifling monopolies. When New Brunswick decided to grow its little dairy industry, for example, it faced a tough challenge. How could it expand when the law limits the province’s producers to feeding its 760,000 citizens, who, with the exception of poor people, already get as much milk as they want? The answer was a deal to raise and sell 50,000 dairy cows to Pakistan. New Brunswick couldn’t keep some or all those cows and export the milk; the national milk marketing system demands that any extra production be spread evenly among dairy farms across Canada. Besides, quota for that many cows would have cost $600 million — half again as much as the whole deal, which includes huge amounts of production and processing paraphernalia.

Yet farmers producing supply-managed foods for Canadians still must tie up that kind of money in quota — investment that produces not a morsel of meat, not an egg, not even the mustache on a milk drinker’s upper lip. And incentive-skewing regulations — the kinds of things that penalize excellence to reward mediocrity — remain alive and well.

At times through the years when the world price was low, Maritime livestock growers could have bought offshore feed cheaper than subsidized Canadian grain. They never did. Under rules that remained in place until Feed Freight Assistance ended, a would-be grain importer needed permission from the Canadian Wheat Board, the world’s biggest grain seller — sort of like getting General Motors’s permission to buy a Dodge. Even if the permission had been granted (and it never was) there were other impediments. Transportation regulations required the use of specific kinds of ships and unloading procedures — costly ones, sure to eat up any savings. Then there were obstructionist inspection requirements, more rigid than mere health and safety concerns would demand. The Maritimes were, in everything but name, a captive market of the West.

TODAY’S GOVERNMENTS MAY BE OUT OF MONEY, BUT THEY CAN STILL pretend that such regulatory interventions don’t cost anything. And between the lines of my summer conversations and background reading, were hints that convinced me that this is where big battles remain to be fought.

It would have been funny if it weren’t distressing how every minister and senior bureaucrat I met in four provinces so scrupulously avoided the S-word when discussing lingering farm subsidies. They’re pleased to explain how their governments pay 25 per cent of the premiums for crop failure protection plans, but they recoil from calling this spade a subsidy. Enticing farmers into such programs may well be wiser than the alternatives — either coming up with ad hoc bail-outs when crops inevitably fail, or risking a spate of bankruptcies. But such widespread coyness in the way policy makers speak suggests greater commitment to politically correct language in public discourse than to the principle of efficient markets.

Then there’s the ubiquitous bureaucratic lip service to supply management, even when it’s clearly against the speaker’s best interests. Why would Ontario, with its richly profitable and sustainable poultry and dairy farms, want to perpetuate a market-skewing, development-deadening, consumer-unfriendly system? Why would Saskatchewan or Manitoba, where farmers are sitting on millions of bushels of feed grain they can’t afford to ship? Why would New Brunswick, stuck with unsustainable farms and denied the opportunity to grow an export industry? The answer hasn’t changed. Governments are still spooked by farm lobbies. Special interests — those accustomed to a place at a bountiful trough — are speaking loud and clear. But nothing much is being said by the rest of us — those merely denied a potential opportunity that we may not even know should be there, or those who pay the bills without giving them much thought. This is worrisome. History tells us that, when it comes to Canadian farm policies, squeaky wheels get greased. And greased. And greased.

WHAT IF CANADA DIDN’T HAVE FARM POLICIES ANY MORE? What if we had, instead, federal and provincial food policies that balanced everyone’s interests? Farmers, processors, consumers, taxpayers and politicians — we could find a good deal of common ground if we looked for it.

Nettie Wiebe of the National Farmers Union speaks for a constituency that dreads the day non-farm voices dominate the policy debate. She foresees a trashing of the farm-gate price, with no resulting savings for consumers, who pay far more for processing, packaging, transportation, wholesaling and retailing than the producer ever sees.

But trashing the farm-gate price serves no one’s interest. It’s as short-sighted as the policies we’ve pursued. Smart agriculture is profitable in Canada. Studies show that young farmers make a decent return on investment, whereas older ones — many not so well equipped with sharp pencils or new technology and some coasting to retirement — would tend to do better by selling out and putting the money into GICs. Even so, a farmer’s average net worth is $400,000, compared to $80,000 for the rest of us. The smart strategy would encourage more, not fewer, young savvy operators to enter the field.

How? By letting them do what they do well. Let Jay Reesor have all the chickens he wants; let Toronto-area consumers decide how far they’ll drive and how much they’ll pay for an extra-fresh egg; let the guys who go around counting chickens find real work to do. Give George Leroux the freedom to meet the Yankee invaders head on at the border. Let British Columbians eat B.C. butter — if their producers are efficient, it would save cross-Canada transportation costs. Free up the hundreds of millions of dollars tied up in quota, letting it be invested productively to create something people can eat. Let Hubert Esquirol truck his grain to Minneapolis if Canadian railways won’t land it at the Lakehead or in Thunder Bay for reasonable cost. Give New Brunswick potato farmers a level field to develop grain as a new cash crop and give respite to their tired soil. Let farmers and processors everywhere profit from new export markets. Reward the innovators who find ways to increase production or to use less energy, less fertilizer, less spray. Make it, at long last, less profitable for farmers to spend their energy milking the government than milking the cows. Free farmers to pursue only the goals that make sense for their level of skills, their amount of capital, their land. Leave the business of farming to farmers.

When farmers succeed in putting the best-suited land, the best genetics, the best technology and the best management to work in the best places, processors will have more raw product at a more reasonable cost. If the guiding principle becomes economic and ecological sustainability, no longer just political whim, consumers will have cheaper food — not just today and tomorrow, but long into the future. As wasteful subsidies end, taxpayers will have, if not lower taxes, then at least the prospect of a little something left over in the treasury to shrink the federal deficit or the provincial debt. As production reorganizes in the locations with natural advantages, governments will see some genuine regional development — perhaps not every commodity being produced in every region, but strong sustainable industries wherever the mix is right. As capital is put to better use, Canada will export more, creating jobs, improving the balance of trade and — not incidentally — helping to feed a burgeoning and hungry world.

There may still be agricultural costs that non-farm Canadians ought to share. Are health inspections — once the responsibility of government but now paid for by farmers — a boon to the grower, the consumer, or both? Is research a proper societal expenditure, one that ought to be borne by industry, or should it, too, be a bit of both? The cost of environmental protection is soaring for farmers, and society at large has a huge role in determining how high it need go and how it can be met. None of these questions are solely for farmers to answer. They’re for all Canadians — the rightful purview of a genuine food policy.

There will be no getting around the need for Canadians to continue paying for what we get. But isn’t it time we start getting what we pay for, too?


Letters

, Wawota, Saskatchewan, responds: February 3, 1997, Claremont, Ontario, responds: February 23, 1997, Burlington, Ontario, responds: August 31, 1997

  1. John Husband
  2. Lorne Almack
  3. Frank Gue
  4. Don Cayo replies

John Husband, Wawota, Saskatchewan, responds: February 3, 1997

As an organic grain farmer from Saskatchewan, I read “Harvesting Subsidies” by Don Cayo with great interest. Ten years ago I felt isolated when questioning a world run by Big Brother. It was accepted that if government did not lead the way, we would be on the slippery slope toward Third World status. It now becomes more evident every day that most of society’s problems can be analyzed right back to government meddling. Agriculture is not an exception, in fact, it provides an obvious example.

For over half a century Canadian agriculture has been subjected to studies, regulations, bailouts, incentives, controls, royal commissions, this-time-we’ll-get-it-right schemes and reports piled upon reports. Agriculture is reeling, but fortunately the patient has not died!

Argentina provides an interesting comparison. Canada and Argentina share many agrarian similarities in both background and establishment. However agricultural policy took a very different course in Argentina. Agriculture there has been unremittingly taxed for the last 75 years in order to provide government money to develop other industries. The result? Agriculture remains the one healthy industry in a Third World country filled with inefficient and unprofitable industries and provides the only reliable source of foreign earnings. In the long run, do all economic endeavors of governments actually work backwards?

Organic agriculture has become a growing force both in Canada and the world. That growth is due to dedication complemented by consumer acceptance and support. A foundation principle of organic agriculture is producer control and accountability to our customers utilizing an audit control to ensure the integrity of our products. All monopoly marketing boards are incompatible with organic methods, and at best they are only an expensive impediment in marketing.

It might be observed that government controlled monopolies, although impacting dramatically on the farmer, yet seemingly innocuous to the consumer, are not strictly a farmers problem. It is important to recognize that selling is also buying, and denial of one is denial of both. Few consumers in Canada will be aware that in the years 1993 to 1994 the Canadian Wheat Board restricted all Canadian flour mills to lower grades of wheat in order to save the best wheat to pursue export markets. This violates organic principles which place domestic markets first.

Ensuring food safety may be a legitimate role for government, but consumers and producers certainly don’t need government bureaucrats as expensive middlemen in the food industry.


Lorne Almack, Claremont, Ontario, responds: February 23, 1997

Oh dear, more simplistic, misleading, neo-conservative hype, spreading nonsense about supply management.

Don Cayo wrongfully assumes a free market where none exists. U.S. farmers slurp at the public trough beyond the wildest dreams of their poor Canadian farm cousins. European food producers are even better treated. The price they get for wheat is three times higher than our farmers receive. Negotiate an international level playing field, and we Canadians will compete anywhere. Free us of the burden of subsidizing urban sprawl through tax assessment on farm land to pay for education, urban sewers, and roads for commuters.

Mr. Cayo should know that they grow potatoes in New Brunswick because that is the only short-season, marketable crop that will grow in the nutrient-poor soils of NB. There is no Class 1 food land in Canada east of the public lands of Pickering.

I can agree with the elimination of the Crow rate and Western Grain Stabilization, which provides cheap feed grain to Quebec and the Maritimes. But be careful; U.S. chicken, beef, and hog farmers also thrive on subsidized feed grains. Also, beware of the possible abuse of monopoly power by railroads and food cartels capable of manipulating markets.

But most alarming is Mr. Cayo’s confusion on supply management. He reveals a typical urban, neo-conservative bias favoring big business. Every industry, manufacturer, or service supplier practices supply management. General Motors practices supply management. It continually monitors sales, production, and inventory for each car model. When sales are slow, production is cut back. Production is planned to meet demand at a price set by GM. Auto manufacturers do not produce to capacity and supply any dealer or customer with cars at a fluctuating bid price. GM would not appreciate price fluctuations or direct competition from other auto makers. Did Mr. Cayo ever try to buy a Ford from a GM dealer? GM also gets a massive subsidy from the public supply of roads and hospital insurance for highway victims. GM workers also benefit from the controlled market. Auto workers’ wages are passed on to the public. Have you noticed that car prices rise much faster than food prices? What is good for GM is also good for our farmers. Ideally, in a more perfect world, both should operate in a free market.

Mr. Cayo should know that in many states of the U.S. marketing follows the Canadian practice. Quotas are set and production planned to meet local demand. In other states dairy factories produce the milk at less cost. Efficiency is achieved by economies of scale – replacement of owner operated farms by paying minimum wages to immigrant workers. Efficient? Yes! Made so, by low wages, massive feeding of hormones and antibiotics, and spraying of carcinogenic pesticides. Huge, efficient dairy farms suffer from a lack of animal husbandry. Mastitis is controlled by penicillin, not by common hygiene, animal care, and early diagnosis. I will not drink Florida milk. Pasteurized puss is not appealing. I will not eat U.S. chicken because I abhor a product washed in its own fecal matter, that cannot safely be prepared on a cutting board for fear of salmonella poisoning. Low price and greater efficiency does not overcome my repugnance toward U.S. industrial agriculture.

When I visit the U.S., I bring my own eggs, bacon and chicken. I buy its cheap gin made from subsidized U.S. grain and practically free of tax. Canadians should continue to support orderly marketing, and quality supply at a reasonable price.

P. S. I enjoy reading The NEXT CITY despite being baited by nonsense authors like Coyne and Cayo.


Frank Gue, Burlington, Ontario, responds: August 31, 1997

In reply to Mr. John Husband’s question, “Do all economic endeavors of governments actually work backwards?”

The short answer is: Yes they do.

Economic endeavors of government conform to an empirical law which I believe I was the first to formulate, viz: The most probable result of government intervention in an economic matter is that it will make the matter worse.

This is because of the inevitable unintended consequences which politicians and bureaucrats are famously unable to foresee. These unintended consequences, of course, require more government intervention, which gives rise to further unintended consequences, ad infinitum until the economic and social overload imposed by regulated intervention causes total collapse of the economy and society.

This has happened unnumbered times in history and doubtless prehistory, the most recent and spectacular examples being the U.S.S.R., Albania, and their contemporaries.

Lest the above be thought merely a cynical smart-alec one-liner, let us go no further than Editor Lawrence Solomon’s lucid explanation of how the minimum wage has operated to eliminate thousands of job openings (“The ends of unemployment,” Summer 1997). Very similar articles have appeared often showing how, let us say, rent controls act to deny housing to people who need it.


Don Cayo replies

I am heartened by John Husband’s letter, discouraged by Lorne Almack’s. I wish I’d known of the Husband farm when I was researching my piece for The NEXT CITY. I like to write about farmers with the initiative to carve out niches to meet real demand rather than pander to the policy of the month.

I don’t mind Mr. Almack’s name-calling. I’ve been judged worse — by critics across the political spectrum, some who analyze my work more astutely than this letter writer does. But I’m saddened that so often we Canadians don’t debate the merits of policy; we slide too easily into this so’s-your-mother tone of discourse.

Mr. Almack and I seem to agree on the inherent ability of Canadian farmers to compete and on the wisdom of scuttling grain transportation subsidies. So where do we disagree?

Well, he says, “Don Cayo wrongfully assumes a free market where none exists.” Huh? If I were unaware of European and U.S. agriculture subsidies, how could I write about them? My fifth paragraph noted that the European Union’s “food policies are so screwed up . . . as to make intelligent comparisons impossible.” And in the sixth paragraph I said, “At the start of the free trade era, when Canadians were overpaying their farmers $6.8 billion a year in either direct subsidies or inflated prices, Americans were overpaying $78.5 billion. They’re still at it.” So apparently I’m guilty of “simplistic, misleading, neoconservative hype” because I believe waste in Canada shouldn’t continue unabated forever just because other people are wasteful too.

Or perhaps, given Mr. Almack’s claim that New Brunswick can grow no crop other than potatoes, my sin is believing a wider range of crops is possible on land where farmers used to (and some still do) grow a variety of other things. Never mind government studies that show lots of good land available, some under cultivation and some not. Look at Ashley Long, a farmer a few kilometres up the Kennebecasis Valley from my home, who sold his dairy quota five years ago and went into grain — and makes at least as much money now. Look at history. New Brunswick may never have vast acreages to rival the West, but we fed ourselves and our livestock before, and we can do it again. Pre-Loyalist Acadians, for heaven’s sake, were self-sufficient for a period of time that lasted longer than Canada has been a country.

But where I really seem to get Mr. Almack’s goat is with my distaste for supply management — the cushy closed shop that frees dairy, chicken, and turkey producers from any inconvenience of competition at home or abroad. Somehow, he equates that with “a typical urban, neoconservative bias favoring big business.” I did write about Coldsprings Farm, a large turkey producer that would be happier without supply management. But I also wrote about how the system shafted a lot of littler guys: the New Brunswick turkey producers who were stuck with unsustainable farms that bad policy enticed them to build; the Western grain producers who can’t feed their crops to chickens or turkeys or dairy cows; and Jay Reesor, the fast-on-his-feet market gardener from Markham, Ontario, who was held back by a monopolistic system that shut him out.

My biggest beef with supply management is that it ties up millions of dollars — sometimes more than half the total value of a farm — in quota, an unproductive investment that yields not an ounce of food in return. Mr. Almack does not address that, and it does not seem to occur to him that the barrier such a huge investment creates is more burdensome to a small producer than to a very large one.

His comparison of General Motors’s inventory control to supply management is one I’ve heard often, and it’s as spurious now as it was 20 years ago. General Motors adjusts its own production to the demands of the market, but not anyone else’s production. It competes with Ford, Chrysler, and the imports. And if car companies got together to skew the market the way supply management boards routinely do, they’d be breaking the law.

To me, the most interesting line in Mr. Almack’s letter is, “Free us of the burden of subsidizing urban sprawl through tax assessments on farmland to pay for education, urban sewers, and roads for commuters.” That, of course, is a two-way street — in some areas, “rural urbanites” subsidize farmers by providing roads and services; in other areas, farmers are put under immense pressure by taxes to pay for services they neither want nor need.

That problem will get worse. And that problem — like the questions Mr. Almack raises about environmental responsibility, drug and hormone use, or fair treatment of laborers — is one that farmers ought not be left to wrestle with alone. Society has to decide what its standards are to be and how to pay to have those standards met. And that, as I argue in my essay, is the rightful purview not of farm policy, but of a genuine food policy that represents and balances the interests of all sectors of society.

I don’t believe American-produced meat and dairy products are as unwholesome as Mr. Almack claims, but American agriculture has run into some serious problems that I hope Canada avoids. The environmental cost of overconcentrating production, for example, can be huge. But it doesn’t require a bloated marketing board bureaucracy to see that. Big companies — Coldsprings Farm and Maple Leaf Foods, to name just two that I talked to — are starting to worry as well about what they see as “diseconomies of scale” — costs incurred by corporate producers that are avoided by the efficient owner-operator.

Mr. Almack says he enjoys reading The NEXT CITY. That being so, I invite him to revisit “Harvesting subsidies.” This time, consider the possibility that I’m not a huckster for a political agenda, but rather what I say I am — a guy who read and talked and thought a lot, then concluded that the system fails too many people. Maybe we’ll agree on some things. Can we concur that something’s wrong when scores of thousands of farmers are forced from the land? Do we see trade barriers falling in Canada and around the world, and do we fear for farmers who aren’t ready for vigorous international competition? Do we worry that many farmers overstress their land and squander their capital to produce the wrong things in the wrong places? Are we vexed when many struggling farmers are denied the chance to produce what makes sense for them? Do we think it unjust that consumers have no voice in policies that determine the price and quality of their food, just as farmers have no voice in urban-driven issues that drive up their costs?

Even if we agree on what the problems are, of course, Mr. Almack and I may still favor different solutions. But how much more productive it would be to discuss these issues in a spirit of fair and workable compromise.

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