Mason, of the University of Manitoba department of economics, prepared this article from a paper entitled Prairie Agriculture at the Crossroads: Time for a New Policy. It was provided by Troy Media Corp.
Prairie agriculture must transition to a sounder business footing if it is to survive.
While taxpayers can continue to meet transitory threats such as bovine spongiform encephalopathy, they should not be underwriting the farming sector as a matter of course.
The past three decades have witnessed steady changes in the structure of the farm economy in the developed world.
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These trends, which are mirrored on the Prairies, include fewer households involved in primary farming, rises in the average age of farm operators to over 60, the emergence of fewer, larger farms, increased concentration of revenue among larger operations and convergence in family incomes for agricultural and non-agricultural households.
What is needed to transition prairie agriculture to a sounder business footing?
The good news is that many of the farmers I talk with are eager to make, and have made, many changes to meet the challenges of the marketplace.
The intent of the federal government to support the emergence of strong farm businesses is clear in the evolution of the Agricultural Policy Framework to the current Growing Forward initiative, which is focused on achieving results, reflects input from across the sector and delivers programs tailored to local needs.
Unfortunately, many programs offer contradictory incentives that litter the policy landscape. Further, government has withdrawn from key areas and needs to become engaged in new initiatives.
Canadian agriculture in general, and prairie agriculture in particular, would benefit from a policy that escapes its Depression era focus. Policy must evolve from an income support system that resembles social assistance to a business support model.
The current agricultural safety net programming has its roots in the price and revenue instability of the 1980s.
For example, the international grain embargo against the Soviet Union for its invasion of Afghanistan effectively eliminated key markets for Canadian grains.
In turn, rising inflation and interest rates squeezed farm margins and United States farm policy prompted inventory fluctuations leading to gyrations in grain prices. Farmers increasingly turned to government for financial support to manage these external threats.
By 1990, agricultural support programming had become both complex and roiled by increasing political pressures to respond to serial disasters such as drought and increased agricultural subsidization of domestic farm sectors in the U.S. and the European Union.
Through the 1990s and into the new millennium, farm support became increasingly expensive and complex.
One of the most important trends was the emergence of government subsidization that essentially comprises a large share of farm net incomes and has resulted in taxpayers underwriting the farm sector as a matter of course.
The federal and provincial governments offer a range of programs designed to manage the risks of modern agriculture.
Growing Forward has four main programs and each province offers commensurate general revenue insurance as well as commodity-specific protection programs.
A single insurance program modelled after the Canadian Agricultural Income Stabilization (CAIS) program could and should replace the smorgasbord of initiatives.
In its original form, CAIS was complex and difficult to manage for both the farmer and the bureaucracy. However, three important features of CAIS work to support the strengthening of farms as businesses.
Government and producer share the risk that reduces the costs to farmers. In fact, the farmer decides how much revenue protection to purchase.
The historical average of a farm’s net revenue determines the compensation received. Finally, a farm must experience some good years as part of that average, encouraging profitability.
A single revenue insurance program could meet general business risks in farming. This would alleviate the pressure on governments that are petitioned to offer compensation for every adverse impact on farm incomes.
To be sure, unusual events such as the BSE embargo call for special responses, but these massive cash injections should be infrequent and not the norm.
Rationalizing farm support, which is far from removing support, is only part of a revamped farm policy for prairie Canada.
