Gov’t supports, private tools link to reduce risk

Government support for farm risk management programs is no less important today than in the 1930s, says a Quebec economist.

That’s because “the farm problem” endures and is unlikely to disappear.

However, contemporary and future farm risk management programs need to fit with the wealth of private tools that are now widely available.

“Government intervention must come after other things, after good management, after utilization of risk management tools,” Catherine Brodeur, vice-president with Groupe AGECO, said in an interview during the Keystone Agricultural Producers annual meeting Jan. 25.

Brodeur told the meeting that even though almost a century has passed since the creation of farm support programs in the 1930s, farmers’ need for a government safety net hasn’t disappeared.

The chronically low prices, farmer losses and periods of overproduction during the Great Depression became known as part of “the farm problem,” and many of those features still exist.

Farmers face unique risks, including weather at home and around the globe. Often, they respond to low prices by trying to produce more, further worsening prices.

Interruptions to market access can also cause severe farm income swings.

As well, farming is a capital intensive business, yet generally performed by small family businesses.

Those were all true in the 1930s, but they are also applicable now.

“In agriculture there are market failures,” Brodeur said.

“Free market (economics) cannot answer all the questions or resolve all the problems.”

The old methods of heavy government regulation still occur, such as supply management and heavy spending on bail-out programs when profits crash, but the private sector has also produced many forms of price and production insurance that fulfil vital roles.

Government risk management programs must incorporate privately available tools, Brodeur said.

“They must really adapt and be complementary,” she said.

“Government must be a partner to lowered risk.”

She said new risks leave farmers just as exposed as previous generations. They now face challenges to water supplies and high expectations for water management, are under scrutiny for pesticide use and are being pressured by their carbon emissions.

These risks need to be built into future risk management programs, and may need a government component due to the unique risks that farmers face.

“You cannot say agriculture is an economic sector as any other,” said Brodeur. “Intervention is still relevant, but it’s sure that it has to be renewed (with fresh ideas and approaches.)”

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