The best way to help farmers deal with the farm income crisis is to pay them not to grow grain, says a University of Saskatchewan agricultural economist.
Ken Rosaasen concedes that taking land out of production may seem like an extreme or even unnatural response to the woes plaguing the grain industry.
But he said growing grain at today’s returns doesn’t make much sense either.
“It’s not your first choice, but then a trade war isn’t your first choice either,” he said last week. “This is a distortion, yes, but it tries to push in the opposite direction of another distortion.”
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The basic premise behind the voluntary program – which he has dubbed Freedom to Manage – is to make an acreage-based payment that would encourage farmers to set aside acres in order to avoid incurring further losses.
Simply put, it adds a profitable cropping alternative to the choices available to farmers.
“The acreage payment exceeds the costs of the agronomic practice on a set-aside acre, provides a guaranteed return and lowers the production and financial risk on the farm,” he said in a paper outlining the proposal.
Reduce oversupply
It could also reduce oversupply in some markets in which Canadian production has a direct impact on world prices, such as durum or peas.
And it would be viewed positively by other grain-producing and exporting countries in the context of world trade negotiations.
In recent weeks, Rosaasen has been talking about his idea at farm meetings, in media interviews and discussions with farm groups. He has also sent copies to some government officials.
“A lot of farmers liked it,” he said.
The idea had its genesis in widespread dissatisfaction with the income-based farm aid package announced by the federal government late last year.
Rosaasen heard lots of complaints from farmers and the more he thought about it, the more inadequate the program seemed.
It will be impossible to understand, extremely difficult to administer, won’t help farmers in drought-stricken areas who are in particularly dire straits and will direct money toward some farmers who don’t need it, say its detractors.
Rosaasen, a farmer himself, said he decided to come up with a different approach.
Farmers facing the lowest prices for their available crop choices are most likely to participate, said Rosaasen, while the least productive land would be taken out of production.
How Freedom to Manage would work
- It would apply to all cultivated acres for all crops across Canada.
Sign-up would be in the winter for the upcoming crop year.
- Farmers who chose to participate would receive a cash payment based on the percentage of eligible cultivated acres taken out of production. The payment would be $5 an acre if five percent of acres were taken out, $10 for 10 percent, $15 for 15 percent and $20 for 20 percent.
- In areas where 35 percent or more of the land is usually in summerfallow, the payments would be limited to $5 an acre. In areas where summerfallow is less than 20 percent, the payment is increased by $5 for each category.
- Green manure cover crops plowed down by Aug. 10 would be eligible.
- Payments would be made on the spot through the local elevator or crop insurance office.
- The maximum payment would be $60,000 per farmer.
- The program would be 90 percent funded by the federal government.
* If prices increased after sign-up, a farmer could buy his way out, by
- If prices increased after sign-up, a farmer could buy his way out, by
seeding the set-aside acres and repaying any money received.
