MOOSE JAW, Sask. – An acreage set-aside program in the major grain exporting countries could solve the problems of low grain prices and high world stocks.
University of Saskatchewan agricultural economists Gary Storey and Ken Rosaasen have proposed a co-operative production reduction program as a way to reduce stocks and carryover, and boost prices.
Storey told a Farming For Profit? conference held earlier this summer that this type of program would require the co-operation of Canada, the United States and the European Union, as well as Australia and Argentina.
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He said it wouldn’t cost much and the benefit to the countries’ farmers would be substantial.
“The real problem is extra product on the market,” Storey said. “If we’re going to get prices up, that product has got to go away.”
The economists suggested that Canada, the U.S. and EU form a committee to draft a proposal for acreage set-asides, taking into consideration a targeted price increase and the amount of land that would have to be set aside to achieve that increase.
Producers would bid to take a percentage of their grain and oilseed land out of production for a certain period of time.
The program would have to consider the type of land being set aside, the cost to government and feasibility of administering the program.
“It might allow farmers over a certain age to retire their entire farm, putting the land into some soil-conserving crop such as hay or pasture,” Storey said.
He said taking five percent of the wheat-growing area out of production would push prices up by four percent over 1998 prices, and eight percent by 2003, providing there was no increase in yield.
Corn prices would go up five percent over 1998 and nine percent by 2003. Soybean prices would rise six percent and seven percent, Storey said.
Even if yields increased by one percent on the remaining land, prices for wheat and corn would still rise by six percent by 2003, and the price of soybeans would go up five percent, he added.
The cost to governments would be about $50 per hectare in Canada, $70 in the U.S. and $375 in the EU, he said.
Taking five percent, or 1.195 million hectares, out of Canadian production would cost about $60 million.
A five-percent reduction of 4.65 million acres in the U.S. would cost $330 million, and in the EU it would cost $800 million to remove 2.131 million acres.
“This would not be an expensive program,” Storey said.
