TRUAX,
Saskatchewan, Canada, December 1, 2003: A recent
report from the National Farmers Union discusses what it describes
as myths of efficiency and competition. It is sobering reading
and well worth the time. Using data derived from Statistics
Canada, the study shows that, in contrast to the popularly
held notion, farmers are actually the most efficient part
of the food chain, and possibly of the economy as a whole.
It is an important conclusion, because for almost the last
four decades, agriculture policy in Canada has been driven
by the notion that farmers, particularly small ones, are inefficient
and must either expand or be driven from the business.
Of course, yesterday's large farmer is today's small one,
but governments seem able to forget the past faster than an
election promise flying out the window. The myth of efficiency
(meaning larger size, lower cost of production) as requisite
for farm survival has had a remarkable life span for a notion
that should have died a violent death years ago.
In supporting its argument that farmers are the most efficient
sector of the food chain, the NFU notes that the prices farmers
receive for almost all of the commodities they produce have
not gone up in 25 years. Prices for inputs, however, have
increased exponentially, despite continual mergers and consolidations
among these suppliers.
It is an unfortunate truth that, while increasing farm size
has allowed some to survive, it has not resulted in increased
net farm income. Year after year, decade after decade, average
net farm incomes have remained below the poverty line in Canada.
That is not to say, of course, that agriculture does not
generate greater revenues that it did 25 or 50 years ago.
Farmers have become more and more productive (measured in
terms of output) as they have adopted new technologies and
higher levels of inputs. The simple fact is that the increase
in revenue does not stay in the farmer's pocket. It flows
out, quickly, to pay for all those inputs and technologies.
As well, farmers now get an increasingly smaller piece of
the money that comes from the final link on the chain –
the consumer of the products.
The humble pork chop provides a striking example of this.
Between 1976 and 2002, the price a farmer received for hogs
varied from 50 cents to one dollar a pound (except for the
30 cent a pound meltdown in 1999). The price a consumer paid
for a pork chop, however, increased steadily during that period
from a low point of about $1.75 a pound to the 2002 price
of $4.50 a pound.
It is apparent then, that the efficiencies of the farmer
are good for someone, almost every one in fact, except the
farmer.
Dr. Daryll Ray of the University of Tennessee makes a similar
point about American farmers. He says that farmers do not
respond to market signals in the way you would expect from
other sectors of the economy. When faced with low prices,
farmers do their darndest to produce more to make up for the
low price. This, of course, only makes the situation worse.
Ray's analysis is mostly true, but farmers do also attempt
to diversify when prices fall. The problem is that their remarkable
efficiency allows them to overproduce almost any commodity,
so agriculture tends to lurch from surplus to surplus.
Daryll Ray points out that these production surpluses in
the U.S., driven by the end of compulsory land set-asides,
have been a boon to everyone but farmers, and governments,
which have had to fill the gap on the farm. Integrated livestock
producers, millers and other processors, and importers have
benefited from rock-bottom prices and agribusiness has thrived
on supplying the massive inputs required to fuel this overproduction.
As Ray puts it, "The obvious conclusion is that it’s
the grain users and agribusinesses who are the real beneficiaries
of today's government check-writing."
Ray is a proponent of limiting production to improve prices.
Most farm groups in Canada have not yet made that leap. The
Canadian Agri-Food Trade Alliance (CAFTA) is an example. While
not exactly a farm group, since it is heavily composed of
agribusinesses, it is headed by farmers. Ted Menzies, once
of the now-defunct Western Canadian Wheat Growers is the president
and Neil Janke of the Canadian Cattlemen's Association is
vice president.
CAFTA's proudly proclaimed motto is "Prosperity Through
Trade." According to CAFTA, only trade barriers stand
between the good life and us. Now CAFTA may not be so wrong
if you think about whom it represents. Increased trade and
its sister, increased production, would no doubt be good for
CAFTA's agribusiness members, many of whom, like Cargill operate
on all continents.
As a panacea, increased trade and increased production have
yet to prove of great benefit to farmers. We'll keep trying
however, won't we? After all, how else to keep up our newly
found reputation as the most efficient of Canadians? And as
dumb farmers.
© Paul Beingessner, beingessner@sasktel.net . The author
is a columnist, transportation consultant and third-generation
farmer in Truax, Saskatchewan.
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