Record harvest of profits all came from subsidies

Lawrence Solomon
National Post
June 13, 2002

Last year was a bumper year for farmers, Statistics Canada reported recently: “Farmers’ net cash income rose 29.8% from 2000, as both cash receipts and operating expenses hit record highs.” Agriculture Canada was just as upbeat: “Agricultural Exports Reach All-time High,” it announced. Said federal Agriculture Minister Lyle Vanclief: “It looks like 2001 will be a year for the record books.”

Farmers did do well for themselves. Whether the record they set does Canada proud is another matter.

Before expenses, Canada’s farmers pulled down approximately $36-billion in revenue from the sale of their crops and livestock, and the receipt of direct government subsidies. After subtracting their expenses, they were left with the handsome sum of $3.75-billion to put in the bank. The direct government subsidies? They amounted to $3.752-billion. Subtract those subsidies and Canada’s farmers contributed not a penny in profits to the Canadian economy. All they harvested were subsidies. It gets worse.

Farmers not only received direct payments from governments, they also received inflated payments from consumers for staples, such as the artificially high prices that governments forced Canadians to pay for our milk and cheese. And farmers also benefitted from payments that the government made to support farming, such as trade promotion activities.

All told, according to Agriculture Canada’s Data Book, Canada provided close to $5-billion in farm subsidies. It was a record year, all right. In Nova Scotia, for every dollar of profit that a farmer made, society kicked in $3.46. In Quebec, we provided $5.76. In Alberta, $16.76. It was also a record decade for farmers. For every dollar of profit, Canadians provided $3.53. Not one province operated a profitable farm economy over the last 10 years.

When faced with criticism over the subsidies that they receive, farm lobby groups claim that the subsidies help consumers by lowering the price of food. The lobbies don’t explain that the consumers who benefit don’t live in Canada – we’re the ones who get to pay the inflated prices. The consumers who do benefit from Canadian subsidies live chiefly in rich countries whose citizens don’t need Canadian help to pay their grocery bills.

Take Saskatchewan, whose farmers received more than $1-billion last year in direct government payments, the most of any province. Little that Saskatchewan produces is meant for the local economy. Americans are Saskatchewan’s biggest customers by far. Next come the Japanese, then the Europeans. The more we sell to foreigners, the more we lose. In a good year, Saskatchewan exports $4-billion in agricultural products at a loss, in a bad year, $5.5-billion.

These days, Saskatchewan farmers blame high U.S. and European subsidies for their trouble. But several years ago, American and European subsidies were at their lowest levels in recent times. A decade ago, Canadian farmers received greater subsidies than either American or European farmers. At no point did the Saskatchewan farm economy turn a profit.

Because the federal government knows that most Prairie grain farmers have no prospects of standing on their own two feet, regardless of the level of U.S. subsidies, our federal government this week agreed to bend to their demand for more handouts. When we provide them, Americans and other rich-country consumers will get more of our taxpayer-provided farm commodities, and Third World farmers – who legitimately complain that our subsidies undermine their ability to earn a decent living – will continue to be put out of business.

There is a better way. Instead of using our farm subsidies to weaken the economy at home and in poor countries, we could use the existing subsidies to generously buy out Prairie farmers and others willing to sell their farming operations. The compensation packages could average in excess of $1-million per family – more than enough to give young farmers an opportunity to start a business in the real economy, or to provide a comfortable nest egg for those who wish to retire – and taxpayers would still be ahead.

The unproductive farms tend to produce for the export market, and they disproportionately lie in the semi-arid Prairies, which have historically received too little rainfall to support farming. After these farms are bought out, and after we removed subsidies from the remaining farms – those able to make an honest living off the land – Canada would be left with numerous small operations, mostly in the farm belts around cities. These farms, close to markets and producing high-value fruits, vegetables and other perishables, are largely immune from foreign competition and viable without subsidies. In fact, these small farmers already turn down the government’s very largest subsidy, heavily subsidized crop insurance, because they can self-insure more economically by diversifying their crops. The farms that overwhelmingly latch on to subsidized crop insurance are the large mechanized farms producing low-value commodities – without subsidized crop insurance, they would go out of business.

More subsidies won’t save Canadian agriculture, they will only harm taxpayers and consumers. Agriculture Minister Vanclief understands this: “The high level of subsidies depresses prices and effectively shuts out producers from developing nations,” he told the United Nations World Food Summit earlier this week. Mr. Vanclief was complaining about U.S. subsidies. His complaint is no less valid in Canada.

FARM SUBSIDIES PER DOLLAR OF FARM PROFIT (1992 – 2001):

Nfld: Transfers from taxes, Transfers from consumers = 4.77

PEI: Transfers from taxes, Transfers from consumers = 2.38

NS: Transfers from taxes, Transfers from consumers = 3.02

NB: Transfers from taxes, Transfers from consumers = 4.47

Que: Transfers from taxes, Transfers from consumers = 4.60

Ont: Transfers from taxes, Transfers from consumers = 6.10

Man: Transfers from taxes, Transfers from consumers = 2.83

Sask: Transfers from taxes, Transfers from consumers = 3.41

Alta: Transfers from taxes, Transfers from consumers = 2.66

BC: Transfers from taxes, Transfers from consumers = 1.81

Canada: Transfers from taxes, Transfers from consumers = 3.53

Source: Urban Renaissance Institute

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