BUSINESS WATCH

Farming in the ‘Dirty Nineties’

It now costs $100,000 to maintain a single Canadian agricultural job, but too many farmers still face bankruptcy

Peter C. Newman October 1 1990
BUSINESS WATCH

Farming in the ‘Dirty Nineties’

It now costs $100,000 to maintain a single Canadian agricultural job, but too many farmers still face bankruptcy

Peter C. Newman October 1 1990

Farming in the ‘Dirty Nineties’

BUSINESS WATCH

It now costs $100,000 to maintain a single Canadian agricultural job, but too many farmers still face bankruptcy

PETER C. NEWMAN

Spare a thought for Prairie farmers, busy harvesting the second-largest crop in history—and going bust in the process. It’s not an issue that makes headlines in the urban tabloids or grabs much time on The Journal, yet Canadian agriculture is in a state of high crisis and nobody, including the men and women who till the good earth, has the faintest notion how to solve it.

Last week, Ottawa poured subsidies worth at least $2.7 billion into Hibernia to fund an $ 18-billion project which will be economical only if oil prices stay at their present, artificially high level. Since all the Newfoundland oil appears destined for the United States, the federal largess was based solely on the hope that the initial construction phase would create an estimated 2,000 temporary jobs.

That figure is dwarfed by the amount of annual payouts to western grain farmers, which under the Mulroney government have totalled much more than $17 billion in six years. According to the Paris-based OECD, which tries hard to produce objective statistics on its members’ activities, when all forms of agricultural protection are taken into account, “the cost of each job saved in agriculture in Canada by subsidization is roughly $100,000.” Agricultural subsidies in the developed world, now running at $250 billion annually, are clearly out of control, so much so that 40 per cent of the total payouts are based on offsetting other countries’ subsidies. But even in this league, we’re out of step. According to the OECD, the $100,000 it costs to save each Canadian farm employee is five times as high as the equivalent cost in the United States ($20,000 a year) and the European Community ($19,000). Canada’s 105,000 grain farmers are this country’s most expensive citizens.

Canadian agriculture receives more subsidies than all other industries combined. In 1989, for example, farmers pocketed $3.3 billion from the feds (while all industrial programs distributed $2.7 billion) and received another $2 billion from provincial treasuries.

The amounts are staggering, and most farmers resent being beholden to the politicians for such pseudo-generosity, all too aware that they are the victims of a system that rewards partisan ploys and has no connection at all with the laws of supply and demand.

What is controlled by supply and demand is the price of wheat—and that’s where this year’s disaster looms. (As opposed to last year’s disaster that resulted from some of the worst drought conditions since the 1930s.) Current crops have been so bountiful, not only here but in Western Europe, the United States and the Soviet Union, that the record harvest of 584 million tons expected this season is driving down the price of wheat below its cost of production. The Canadian Wheat Board has not, as has been reported, officially stopped selling grain—it’s just that no one is buying it. At the moment, the market glut has forced quotes for No. 1 wheat to $99 a ton, which is $25 less than the Wheat Board has been paying producers.

The real quandary of Canadian agriculture is not the size of the subsidy but that it’s not solving the problem. In Saskatchewan, which has been the hardest hit, the Christian Farm Crisis Committee estimates that at least 10,000 of the province’s 60,000 farmers live on the

edge, their land and equipment hable to seizure by banks and other financial institutions.

At some point soon, world agriculture must move to a sensible production and marketing plan, with cost efficiency, not local politics, determining income levels. Ironically, in any fair contest of comparing growing conditions, fertility of soil, weather, harvesting technology and the farmers’ brain power, Canadians rank way ahead and could handily compete with their European and American rivals.

Hopes are fading that the current round of GATT talks can begin to resolve the farm subsidy issue, even if the Mulroney government has the courage to throw the sacrosanct Crow Benefit, or $700-million annual railway subsidy, onto the negotiating table. “One of the Canadian dilemmas,” says Prof. J. C. Stabler, head of the agricultural economics department at the University of Saskatchewan in Saskatoon, “is that we can’t quite decide whether we want to punish our farmers for being involved in such a volatile business, or support them because the international situation isn’t their fault. To this point, we’ve subsidized them, but we’ve done it begrudgingly on a year-to-year basis and after the fact—so that farmers who plant in one season haven’t the faintest notion what they’re going to receive for their crops, while their counterparts in North Dakota know a year ahead.”

“Everybody recognizes,” adds Stabler, “that we’ve created a problem of overproduction and that it would be in everybody’s best interest to solve it. But there’s no popular support for doing anything quick or drastic. At the moment, all we hope from the GATT talks is that they freeze subsidies at their current levels and begin negotiating them down. We may be looking at a 10or 15-year process. No government could survive a sudden lifting of subsidies and the massive bankruptcies that would cause.”

When I called on Carol Teichrob recently, who with her husband, Donald, farms 700 acres near Saskatoon and is an articulate critic of her industry, I found her espousing an interesting theory for the “Dirty Nineties.” She would like to see the imposition of what she calls a “made-in-Canada” food policy and a price-stabilization plan that involves stop-loss levels, which in effect would act as a guaranteed annual wage for farmers. “If you made it too high,” she points out, “people would start bidding up the price of land and the spiral would start all over again. But you’ve got to have stability at a break-even point, probably the average cost of production. Then there would be an insurance scheme to make up the difference with market prices. It would be actuarially sound and financed by farmers. This would stop farmers from being treated like political footballs and heal the tremendous rift between rural and urban Canada. We must recognize food production for its true worth.”

The greatest puzzle of all is that we can’t, in this year of abundant overproduction, get food to those who really need it. The world’s population is increasing by 75 million a year and every day another 35,000 people—mostly children—die of starvation. That’s the real crime of our agricultural non-policy.