By David Morris

Safety Nets Why Farmers Want Equity With U.S. Grain Producers

It's little wonder that Canadian cash crop farmers are feeling frustrated and unappreciated. Brian Doidge, speaking to OCPA's Annual Convention, illustrated clearly how Canadian grains and oilseeds producers are caught between the proverbial rock and a hard place. From one side, producers are squeezed by the agriculture policies of governments in the U.S. and European Union, which serve to artificially stimulate production and drive grain and oilseed prices ever lower. And from the other side, corporate concentration has strengthened the power of agricultural companies to control prices of both farm inputs and outputs. As a result, free market determination of the price of agricultural commodities is a thing of the past.

Since 1980, successive Farm Bills in the U.S. have had the effect of lowering grain and oilseed prices, while protecting American producers from the fallout. Despite the fact that one goal of the WTO agreement was to reduce farm subsidies, direct transfers from the U.S. government to farmers have increased and are now at record-high levels. In 1999, for example, half of U.S. farm income came from the government, and virtually all of that money went to grain and oilseed growers. As a result, the river of grains and oilseeds from American farms has continued to flow without interruption.

Over the same period, a 1980 U.S. Supreme Court decision legalizing the patenting of life forms has allowed the agricultural biotechnology industry to flourish. This, in turn, has encouraged consolidation of agricultural corporations. Doidge listed 10 sectors of the Canadian agri-food industry which are dominated by no more than three companies. In the case of corn, one person with CASCO purchases or controls the purchase of 54 per cent of the corn going through the check-off program. With this degree of concentration comes the power to influence prices. Doidge quoted C. Robert Taylor from Auburn University as saying, "In other words, the ‘farm gate to dinner plate’ power of the ag giants is so concentrated today that these dominating corporations can take their profit from the farmer side of the equation, not the consumer side.”

To illustrate this point, Doidge referred to the George Weston company, a conglomerate that owns several food retailing chains. In 1998, George Weston's made a profit of $773 million while the total profit for ALL Canadian farm sectors, including those under supply management, was $367 million. This one food conglomerate made twice as much profit as all the farmers of Canada combined! When George Weston's made a return on investment of 37 per cent, Canadian farmers averaged a return on investment of 0.3 per cent.

According to Doidge, "the reality is that price is NOT the result of freely determined supply and demand. So, the thought that, someday, we're going to leave behind subsidies and supports for agriculture is a fallacy. As long as we have a market situation where growers lack market power and are driven by ag policy on one side for supply and by concentration in the market side for demand, you're in a hopeless situation."

Doidge sees little prospect that the situation is going to change soon. "Both the U.S. government and the European Union will continue to subsidize their farmers. They’re not going to ‘disarm’ soon.” Government assistance programs in Canada need to reflect this reality, he said. “Growth in the agri-biotech sector ought to prove to you that price is global while costs are local. Therefore, we ought to base support not on artificially determined prices. Let's base support on what growers can actually alter, and the only thing that you can actually alter are costs."

Doidge concluded his presentation with a mix of optimism and caution. “There is a world of opportunity out there - we're just on the edge of the next green revolution. But, folks, we can't fully participate unless the grain and oilseed sector in Ontario has a strong financial base from which to work.”

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