Blaming European Union farm subsidies for low commodity prices and the prairie farm income crisis is a “convenient fiction” that allows governments to ignore the real problem, says the National Farmers Union.
The problem, it said, is corporate power concentration and profits everywhere in the food chain but on the farm.
“There is very little evidence that EU subsidies are the cause of the income crisis,” NFU executive secretary Darrin Qualman told the Senate agriculture committee Feb. 17. “There is compelling evidence that the problem lies elsewhere.”
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The study, released in Ottawa and at several prairie news conferences, challenges the presumption that European and American subsidies have created overproduction, low prices and the income crisis.
Qualman said this has allowed the federal government to concentrate its policy promises on using world trade talks to negotiate a reduction in subsidies.
But he produced production charts that indicate that in the past 20 years, wheat production increased in less-subsidized Australia, Argentina and Canada as well. In Australia, production increased by a higher percentage than in the EU. Production in the United States declined seven percent.
“If subsidies produce overproduction, I guess you have to argue that lack of subsidy also creates overproduction,” said Qualman. “Had EU subsidies been lower or non-existent over the past 20 years, there is little evidence that its current production would be lower, that world grain prices would be higher or that the worldwide farm income crisis would be less severe.”
If not subsidies, then what?
The NFU said federal statistics show that since 1974, gross farm income has increased from $9 billion to $29 billion, yet net farm income has remained stable or declined slightly. Where did the money go?
Qualman said manufacturers and sellers of inputs used their market power “to capture 100 percent of that increase.”
He said the problem is that input providers, farm produce purchasers and food retailers are concentrated multi-billion dollar corporations with far more market power than several hundred thousand family farmers.
The NFU study provided several examples.
Since 1976, the price of hogs has remained stable or fallen while the retail price of pork chops has more than doubled. During the 1998-99 crash of hog prices, packer profits increased.
While the farmgate price of wheat has remained stagnant for 25 years, the retail price of the bread manufactured from a bushel of wheat has tripled.
And when grain prices did increase briefly in 1996-97, fertilizer prices rose to capture most of the benefit.
Qualman said most of the companies who sell or buy from farmers have healthy returns on investment while in 1998, farmers had a 0.3 percent return on investment.
