BUSINESS

Harvest of misfortune

Prairie grain farmers face a bleak year

JOHN DEMONT October 1 1990
BUSINESS

Harvest of misfortune

Prairie grain farmers face a bleak year

JOHN DEMONT October 1 1990

Harvest of misfortune

BUSINESS

Prairie grain farmers face a bleak year

Kenneth Motiuk says that the harder he works, the less he earns. Last week, Motiuk, 36, was riding a combine day and night on his 2,300-acre wheat, barley and oat farm 80 km east of Edmonton, harvesting his portion of the second-largest wheat crop in Canadian history. But even if his own harvest is much larger than normal, Motiuk, his wife, Wendy, and their four children will not reap a financial windfall. Forces far beyond the family’s control—a multibillion-dollar crop subsidy war, a domestic market that is too small to absorb anything more than a tiny portion of production, and record wheat crops in the United States, Europe and the Soviet Union— have combined to drive the world price of wheat down to $99 a ton, which is even lower than prices during the depths of the Great Depression, once inflation is factored in. And while the Canadian Wheat Board remains obligated to buying all the wheat Canadian farmers can produce, at a floor price of about $125 a ton, Motiuk and thousands of other Prairie farmers say that even at that price they will not break even. He added, “On the combine, come midnight you wonder what you’re doing it for.”

Even before the recent trade embargo against Iraq—which eliminated one of Canada’s biggest export markets for grain—experts predicted that global wheat production

would continue to outstrip consumption, adding to the existing oversupply that has pushed prices down. At the same time, Canadian farmers are caught in the cross fire of the bitter agricultural subsidy war between the United States and the 12-nation European Community (EC), which remains the main stumbling block in the latest round of General Agreement on Tariffs and Trade talks, continuing this week in Geneva (page 43). Last week, in fact, the U.S. Senate passed a bill that would formally allow Washington to use export subsidies so that the United States could break into some of Canada’s established grain markets abroad. Said federal Grains and Oilseeds Minister Charles Mayer, who vowed to fight the proposed legislation: “As a Canadian farmer, I find the U.S. action offensive.”

The growing international wheat oversupply is also aggravating the subsidy war. Desperate to sell their wheat, both the EC and the United States are raising export subsidies—government assistance programs to farmers that artificially lower the price of crops abroad—to stimulate sales. Since Aug. 1, the EC has increased subsidies by more than 30 per cent, allowing Europeans to sell wheat on international markets for about one-third of what they charge domestic buyers. Meanwhile, the United States has also sharply increased export incentives in recent weeks, in an effort to sell

more of its harvest to Canada’s traditional overseas customers. Last month, the United States raised its export subsidies to Algeria, a major Canadian market for durum wheat, to more than $50 a ton, compared with $32 a ton in early August. The increase in U.S. subsidies to West African countries has been even more dramatic: they soared to $63 a ton last week from $18 in late July. Said Mayer: “It is an appalling way to treat your friends and trading partners. We would both be much better off working as allies against the Europeans.” But as Canada’s overseas sales continue to plummet because of fierce competition, Prairie grain elevators are overflowing with a near-record harvest. The Wheat Board is anxiously trying to find buyers, even though it receives prices lower than those it pays to farmers. Meanwhile, produc| ers receive only the govemment£ guaranteed price, which for many is I less than their costs.

I Asa result, thousands of debt-laden

x western farmers are in danger of losing their land. According to the Saskatchewan department of consumer and corporate affairs, 119 farmers in that province had declared bankruptcy by the end of August, compared with 152 in all of 1989. Added Harvey McEwen, president of the Western Canadian Wheat Growers Association: “After four years of drought, low prices and crippling international subsidies, we didn’t think the situation could get any worse—but it has.”

In response, western farmers and governments have asked for more federal aid. In recent years, Ottawa, which is trying to reduce its chronic budget deficit, has paid out up to $3 billion annually to Prairie grain farmers—as well as $850 million in special relief and crop insurance last year to farmers who were hurt by a 1988 drought. This year, however, Ottawa has slashed federal government support payments to $1.4 billion.

Agricultural experts say that, in the long run, only a global agreement to reduce grain subsidies will return western Canadian farmers to profitability. But, so far, the EC has resisted pressure from the United States, Canada and other major agricultural exporters because its farmers would be hurt more than larger, lowercost producers in North America. Indeed, last week U.S. Trade Representative Carla Hills conceded that it would be futile to continue to press for an elimination of subsidies. She undertook to table a new proposal at this week’s Geneva session that would seek a compromise while allowing subsidies to continue at a reduced rate. In the weeks ahead, Ken Motiuk and other Canadian grain farmers will be watching closely to see whether Hills’s compromise helps to finally resolve the costly dispute.

JOHN DEMONT

D’ARCE McMILLAN

JOHN DALY