If all the subsidies and trade barriers in the world were suddenly lifted, North American wheat farmers would have trouble making money.
That was the conclusion of Morton Sosland, the publisher of Kansas City-based World Grain magazine, after he studied whether North American farmers could compete on a level global playing field.
North American farmers would need to pay less for land and have access to the best wheat varieties to stay ahead of cheaper competitors.
“The edge we want for North America will come about not just from being the lowest cost producer, but from being the producer able to deliver against higher and higher quality expectations,” said Sosland in an interview.
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He spoke at the Canada Grains Council conference in Winnipeg on March 31.
“We can compete on this level playing field if we grow the quantity and the quality of wheat that will be wanted by increasingly demanding food manufacturers and increasingly demanding consumers.”
Sosland said world grain industry watchers have been stunned this year to see how easily countries like Ukraine, Russia and India could quickly step into the world market to fill export demand left by Canada and the United States.
This proves that the traditional wheat exporters should not assume they can hold their share of the world market because they have better developed exporting systems.
“Any advantage in North America of infrastructure for gathering and shipping grain won’t mean a thing,” said Sosland. “No matter how excellent the facilities that we have built, those other countries are going to find a way to compete.”
Sosland said North American farmers will need to supply high quality wheat markets to pay their costs of production. If suddenly there were no world trade barriers or subsidies, more than half of America’s farms would be unprofitable because of the high cost of their land.
Farmers can meet their operating costs, but without subsidies many American farmers can’t cover land ownership costs.
The new competitors are closer to markets in Africa and the Middle East, he said, giving them an edge in bulk grain shipments.
In the future, premiums from quality wheat will probably be bigger than they are today. But those willing to pay the premiums will want as yet to be developed wheat varieties with specific quality parametres.
Sosland said he has been alarmed by the retreat of governments from funding basic plant breeding research and thinks farmers in Canada and the U.S. need to be given highly refined wheat varieties to stay competitive.
He said government should focus on producing wheat varieties that will specifically help Canadian farmers, rather than producing varieties that can work around the world.
“It should say ‘this variety has an advantage and we’re going to let our Canadian growers take that advantage.’ “
He said farmers also need to reduce their cost of production. In the future, most large food makers will be like Wal-Mart: they will want high quality at a low cost and demand innovation in the products they buy.
If North American farmers can get and adopt innovative varieties that processors are demanding, and grow them at a low cost, they will be able to survive in the world market.
If they don’t, they will be vulnerable to the new exporters who roared into the market this year.
