Program cuts ruffle few feathers when commodities up, but when prices fall …

The traditional boom-and-bust cycle of commodity prices typically has produced predictable reactions from prairie grain farmers.

That is particularly true when the cycle hits the high price phase and farmer bottom lines are looking up.

Many producers use some of that cash to finally replace equipment that has been coaxed through a few additional years of bust.

Some expand their land base to plant more crop so they can cash in even more during the remaining good years, although that typically increases land prices and capitalizes at least some of the benefit into land.

A few use the cash to pay down debt, although overall debt levels have not declined since 1992.

Many put some of that money into a rainy day fund or a program such as AgriStability, knowing full well hard times will come again.

In other words, the years of high prices and improved incomes are generally positive times for grain and oilseed farmers as they take care of a little business that a positive cash flow allows.

However, farmers may well look back on the current commodity price boom with mixed feelings.

All the usual short-term benefits are there, but this time governments are using what surely will be a temporary price spike to justify significant cuts to farm support programs and raise farmer costs.

First came the Whitehorse agreement on the next five years of farm programming under Growing Forward 2, which will potentially cut several billion dollars out of Agri-Stability payments and government contributions to AgriInvest.

Implicit in government arguments was that existing business risk management program benefits are too rich given farmers’ improved financial situation.

Then came the planned increases in Canadian Grain Commission fees as it opens a month of industry consultations on how to do it and by how much. They flow from Canada Grain Act amendments now before Parliament.

These increases have been planned for years in light of annual commission deficits, but previous attempts to download more costs to farmers had failed, in part because of political resistance and arguments about farmers’ ability to pay.

Last week, federal agriculture minister Gerry Ritz was clear that the current price boom has given Ottawa the window to act.

“We are seeing that there are some costs that the farmer can bear now with the increased value to their commodities,” he told the Senate agriculture committee.

So when commodity prices take their next inevitable plunge, farmers will find far fewer support dollars to help them weather it. They raised little fuss when it happened because, heck, they were making their money from the market and not the mailbox.

A George Morris Centre report on the new policy framework lauded it overall as prudent but also as a gamble that assumes the price boom will last indefinitely.

If that assumption is wrong, it said, farmers will find the programs inadequate and begin to abandon them, demanding ad hoc payments or program changes.

This could lead to “much higher costs to the governments despite program changes,” wrote GMC executive director Bob Seguin.

Now that would be an ironic unintended consequence.

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