CANADA

Down and out on the farm

MARY JANIGAN May 4 1987
CANADA

Down and out on the farm

MARY JANIGAN May 4 1987

Down and out on the farm

CANADA

Saddled with debts and threatened by bankruptcy, Dale Frombach has little to show for 22 years of labor on his once-sprawling grain farm 35 km northeast of Regina. Since last fall’s harvest, he has sold 2,400 of his 3,200 acres, and last month he disposed of more than half his equipment—including a combine and a four-wheel drive tractor—at an auction that drew

500 onlookers. Then, as Frombach prepared last week to seed a crop of wheat and barley on his remaining acreage, grain prices plummeted by an average of 18 per cent. The 47year-old farmer struggled to conceal his concern for his future—and the future of his wife and three daughters. “After a while, you become immune to the fact that you are going to suffer another blow,” Frombach said. “But I tell you this: if I lose once more, farming will be history for me.”

Many of Canada’s 145,000 grain farmers shared Frombach’s anguished lament. Last week Charles Mayer, minister of state for the Canadian Wheat Board, announced that the guaranteed prices paid to grain growers will be slashed by 15-to-25 per cent this year. That decline followed a drop of 19-to-26 per cent last year—and brought the price of a bushel of No. 1 red spring wheat down to $2.99, an li-

year low. Indeed, when inflation is taken into account, grain prices are now at their lowest level since the Depression. As a result, for the first time in Canadian history federal assistance to Prairie grain farmers will be almost as large as their total revenues from grain sales—an estimated $4 billion. And provincial governments and farm organizations are begging Ottawa to add another $1 billion to the estimated $3 billion in federal aid. Declared Stuart Thiesson, executive secretary of

the National Farmers Union: “It’s unreal out there. People are vanishing overnight. Without question, this is the worst I have experienced—and I have been involved in the farming industry for 36 years.” Larry Robinson, a grain buyer for the Saskatchewan Wheat Pool in Rouleau, Sask., says that the situation is the worst he has seen in 31 years in the business. Said Robinson: “There’s just no way people

can farm at these prices.”

Nor is there much hope that the situation will soon improve. The recession of the early 1980s strangled the ability of importing countries to pay for grain. So, for the past five years the once-booming growth in the consumption of grain has lagged behind production capabilities. At the same time, the amount of grain being produced around the world has skyrocketed. Such traditional Canadian customers as China and India, which

suffered famine in the 1960s, now export some grain. As export markets dwindled, the United States and the European Community (EC) increased subsidies to their farmers to keep the price of their grain low and maintain their share of world markets. The result was predictable: falling grain prices coupled with an enormous world stockpile of 320 million metric tons of grain (total world trade involves only about 190 million metric tons each year).

Canada is using every international avenue to remedy that situation—but short-term relief is unlikely. On May 4 in Geneva, the agricultural negotiating group of the 92-nation General Agreement on Tariffs and Trade (GATT) will discuss ways to break the cycle of subsidy. But those talks are expected to drag on for the next four years. Canada has joined 13 other agricultural nations, including Australia and Argentina—the self-styled Fair Traders in Agriculture Group—in a bid to give added momentum to the GATT talks. Prime Minister Brian Mulroney will also raise the issue of agricultural subsidies at the Venice summit meeting of the leaders of the seven major western economic powers in June. But in the meantime, Ottawa faces heavy pressure to provide subsidies indefinitely to keep Canadian farmers on the land. “We have accepted that we are into this for the long haul,” said Garry Moore, an agricultural economist with the external affairs department. “We will have to support our producers—but that does not mean we will make them rich.”

The extent of the producers’ plight is startling. Ralph Ashmead, manager of research and development for the federal Farm Credit Corp., estimated that 11.4 per cent of the commercial farmers in Saskatchewan, 9.9 per cent in Alberta and 5.4 per cent in Manitoba are nearly insolvent—a total of 9,550 people. An additional 28 per cent in Saskatchewan, 22 per cent in Alberta and 18 per cent in Manitoba—a total of 23,650 farmers —face cash-flow problems. According to Ashmead, some of the rest are living “hand-tomouth—just above the margin.” So if grain prices continue to fall, they, too, will face a cash-flow crisis.

Western farmers can recite a litany of economic misery. In Saskatchewan, which relies most heavily on grain farming, total farm debt climbed from $3.4 billion in 1981 to $4.8 billion in 1985. During the same period net farm income dropped to $699 million from $1.1 billion. In response, the value of land in southeastern Saskatchewan has dropped by up to 40 per cent in the past three years. Last month an issue of The Western Producer, a weekly farm newspaper, carried 29 columns of farm auction announcements. As Ken-

neth Rosaasen, an agricultural economist with the University of Saskatchewan, told Maclean's: “If a neighbor in a city runs a pizza parlor and goes broke, it’s traumatic. But usually he can sell his building because it has a

market value or sublet it—and he keeps his house. It’s much more traumatic for a farmer, because he often loses his house and job—and there is a very depressed market for his land.” The federal government has responded with a patchwork of support programs. Last week Mayer announced an interim payment of $705 million from the Western Grain Stabilization Fund, a voluntary federal insurance

program partly funded by the farmers themselves that reimburses them when grain prices fall below the average sale price of the previous three years. Daryl Kraft, an agricultural economist at the University of Manito-

ba, predicted that the stabilization payout will reach $1 billion by the end of the 1987-1988 season. Ottawa provided an additional $700 million in subsidies for transporting grain to market. It also picked up the tab for the Canadian Wheat Board’s 1985-1986 loss of $201 million. And late last year Mulroney unveiled a $1 -billion Special Canadian Grains Program, which provides a supplementary income to those farmers directly affected by the U.S.-Europe trade dispute. Concluded Kraft: “As a source of income for g Prairie farmers, the I government now is I almost as important f as all of their ° customers.”

Faced with last week’s plunge in

prices, provincial and farm organizations asked Ottawa to repeat last year’s special subsidy program. Saskatchewan Premier Grant Devine said bluntly: “We’re strapped. Farmers are going to need in excess of $1 billion again—and it will have to come from Ottawa.” Barbara Isman, executive director of the Western Canadian Wheat Growers Association, added that the grain industry has been forced to turn

to the federal government for help. Said Isman: “These people have no alternative but to seek assistance from our own treasury.”

The response will almost certainly be favorable. Moore, the External Affairs economist, said that the federal government is discussing whether there should be another program—and how much should go

into it. “A variety of approaches are being looked at, including a multi-year approach,” he said. Added Saskatchewan MP Leonard Gustafson, Mulroney’s parliamentary secretary: “It’s a high priority. The one thing that was indicated was that we would spare no effort in dealing with agriculture.”

The Canadian subsidies cannot compete with those of the United States and the European Community. Last year the EC poured a staggering $21 billion into agricultural subsidies—more than 70 per cent of its total budget.

To compete with those outlays, the United States Congress passed the Food Security Act in 1985, which reduced loan rates for grain producers and maintained high support prices for grain. And last year President Ronald Reagan went further: he authorized the sale of 3.85 million metric tons of subsidized American wheat to the Soviet Union. Although the Soviets decided not to buy the grain, the American offer sparked protests from Canada and Australia, which feared that the sale would drive world wheat prices even lower. Robert Wisner, an economics professor at Iowa State University, said that the U.S. subsidies were intended “to make it too expensive for the European Community to subsidize exports. [The subsidies] signalled to the rest of the world that the U.S. is serious about regaining agricultural markets.”

Those high-flying subsidies have encouraged overproduction in Europe and the United States. Similarly, the University of Manitoba’s Kraft argued that government subsidies keep many farmers in the grain business—even though the current price of grain does not even cover the cost of growing it. “I hope the federal government is looking at some form of farm aid that would encourage farmers to take land out of production,” Kraft told Maclean's. Robert Douglas, general manager of the 4,000member Keystone Agricultural Producers, argued that Canada should use an offer to produce less grain as a bargaining chip in talks with other producing nations. But at the same time, Douglas warned that Canada should not cut production on its own, because it would risk losing out if world demand rises in the future. Said Douglas:

“We do not want to be caught without any inventory when the market shifts.” Perhaps the best long-term hope for Canadian grain producers rests with GATT—and Canada’s partners in the Big Seven group of major industrial countries. In May, 1986, at the Big Seven Economic Summit in Tokyo, Mulroney declared that agricultural issues were the Canadian priority. In the wake of those discussions, Argen-

tina, the EC nations, the United States and Japan tentatively agreed to a Canadian proposal to create a 12-member group of international experts to identify subsidy practices. That agreement fell apart when one of the European countries abruptly pulled out. Declared Moore: “We gave it a shot. When it started to unravel, we just had to pull the plug on it.”

But Canada has not abandoned its efforts to find an international solution to the problem of grain overproduction. Last August it attended the first meeting of the 14-member Fair Traders in Agriculture Group, which was created to lobby internationally for reduced agricultural subsidies. The group’s second meeting is scheduled for May 22-23 in Ottawa. Meanwhile, during his early April meeting in Ottawa with Reagan, Mulroney secured the President’s agreement to push the issue of agricultural subsidies, once again, at next month’s Venice Summit. Canada has also suggested to the 24 members of the Parisbased Organization for Economic Co-operation and Development that all

countries should freeze and eventually reduce government assistance to farmers.

Despite that campaign, senior aides to Mulroney said that change will only come slowly—largely for political reasons. European farmers, they noted, are a formidable lobby group that politicians will defy at their peril. As Mulroney’s press secretary, Marc Lortie, said last week: “Everybody hides behind

their programs. As long as their farmers are happy, they don’t care about the other guy’s farmers.”

Meanwhile, resigned Canadian farmers are planting another crop. Last winter, in a bid to cut his losses, southern Saskatchewan grain farmer Tim Tames sold nearly 1,300 acres for $200,000. He planned to retain 640 leased acres near Coronach, Sask., 160 km southwest of Regina, and raise cattle. But that deal fell through two weeks ago, when the Farm Credit Corporation (FCC) would not finance the sale. Tames said that the FCC did not believe that the prospective buyer could cover his mortgage payments with the money he would receive from grain sales this year. Thwarted, Tames is now grimly sowing his oats and barley. “If the price of wheat keeps dropping,” he said, “there won’t be any point in farming the way people do now.”

MARY JANIGAN

DALE EISLER

DOUG SMITH

MADELAINE DROHAN

IAN AUSTEN