Now that President Donald Trump is putting a kibosh on the Trans-Pacific Partnership trade agreement, commentators are stating the conventional wisdom that Canada and Canadian agriculture depends on trade.
Let us see how an economist would look at the place farmers have in all of this.
Economists notice companies involved in the food chain, from producer to consumer, can protect their share of the consumer dollar, and actually increase it by forming monopolies. Farmers can get the same monopoly protection by forming marketing boards. This creates a problem for industry, which needs a weak link in the food chain.
An example was when people were lobbied so (former Prime Minister Stephen) Harper disbanded the Canadian Wheat Board.
We also see this when clauses are written into trade agreements which can be used to force governments to shut down other farm marketing boards.
Farmers, the weak link, can then have their share of the incoming dollars from trade whittled away by industry.
The result? If we hear politicians saying farmers will benefit from trade agreements, we should expect they are standing in a manure spreader.
For Canadian citizens in general, the worst part about the TPP and other trade agreements are clauses that allow industry to control governments. Around the world there are many examples where industry controls how democratically elected governments manage their country.
More can be said, but you are right, I do not expect the TPP or any other trade agreement will benefit farmers.
Moose Jaw, Sask.
Many farmers are complaining about grain prices being offered this winter, especially for wheat.
It is hard to find a port price for wheat, but data from Agri Canada and Food states the average price this year is north of $8.60 per bushel at Vancouver and even higher on the world market, yet farmers are only receiving a little more than $6 per bushel at the farmgate.
Wanna-be market gurus point to the futures prices to indicate what farmgate prices should be. This is nonsense. Future prices do not reflect actual grain sale prices. They only reflect what speculators are willing to hedge or insure the small amount of grain not sold directly to end-use customers by the four or five big grain companies.
It does not reflect the actual sale price of the grain and it certainly does not predict the future either.
The zealots who say the futures price serves as a price discovery mechanism are misinformed.
The recent trading violations against Archer Daniels Midland, whereby ADM “maintained ownership and control of the accounts on both sides of the transaction,” show a different story.
The process in which a trader buys and sells future contracts to himself or an entity he controls is banned under futures law. Yet the fine was only $25,000 for a company which has a capitalization of about $26 billion. This makes a joke of price discovery and the policing of these markets.
This just shows the transparency that some farmers loudly clamored for years ago is just not possible the way the grain market works today.