“So why are we investing money to increase crop yields? Higher yields just lead to surpluses and that causes lower prices.
“Besides, we don’t have the transportation capacity to move higher volumes anyway. This year’s malaise proves it.
“We’d be better off growing less and keeping the price higher.”
This viewpoint is voiced with increasing frequency, and sometimes it even comes from experienced observers who should know better. While there’s a grain of truth, overall the premise doesn’t withstand scrutiny.
It’s certainly true that greater supply leads to lower prices. But on many commodities, Canadian production is a minor portion of world production. We could hold our yields constant and the price could still be driven down by production increases in other parts of the world.
We might think we’re a big deal on a crop like canola, but the crop competes with and is dwarfed by world soybean production. It’s hard to believe that over the long term we’d make more money by growing fewer bushels.
Canada dominates the world export market in a number of other crops, including lentils, flax, field peas, oats, durum, mustard and canaryseed, and it may seem logical to produce less to force buyers to pay up.
While plausible in theory, any gain would be short term. All of these crops can and will be grown elsewhere in the world if the price be-comes sufficiently attractive.
We may have natural advantages because of our varieties, climate, location and experience, but farmers in the United States, Ukraine and Argentina aren’t stupid. Like farmers here, they’re always on the lookout for new cropping options that might be profitable.
Farmers in Eastern Europe have been trying recently to hone in on flax and mustard production when opportunities appeared.
It isn’t difficult for farmers in other regions to gear up and grow any of our common field crops. And unfortunately, it can be difficult to prevent farmers in some nations from pirating the varieties that Canadian farmers and taxpayers have paid to develop.
Another result of high prices is demand destruction. When prices get out of line, buyers look for alternatives and once they switch to something else, it’s difficult to get them back.
Flour mills have ways to deal with low protein in the wheat they use. Pasta can be produced without using durum. Meat processors don’t have to use mustard products if the price becomes extravagant.
However, while the push for higher yields should and must continue for all our crops, it’s important to note some logistical realities. Our production is a long way from salt water and it will always be expensive to move product to export position. No matter what happens with rail transportation in the years ahead, it isn’t going to get less expensive.
Being landlocked is our competitive disadvantage. It’s why exporting feed barley seldom makes economic sense. Feed barley is sold mainly to the domestic livestock industry.
Oats can work because of the crop’s proximity to domestic oat processing plants and the U.S. marketplace.
However, for crops that need to be shipped to port position and exported overseas, it’s helpful to have a higher value so that the freight cost doesn’t take up such a major chunk.
Yet no matter whether the end-use market is domestic or export, a crop will remain viable only if yield and quality continue to be improved.