New Ag Program

[bob4choice]

In the Nov 13th Issue of The Western Producer the leading headline is "New Ag Program Pondered".

Ag Minister Lyle Vanclief proposals for revamping existing ag programs are summarized.

Point 3, "A requirement that farmers who decide to join sign a long-term commit to stay in the program"
is interesting.

No one is more guilty of not staying with any Ag programs for any length of time than governments
themselves. There have been Lift, Stabilization, Grip, Nisa, Aida, Nisa .... to name a few. Most have
been dropped or changed radically from what they started with. Too often governments haven't done
their homework in designing these programs, so they were fair and sustainable; and each program was
mostly in tune to the philosophy of whichever party happened to be in power.

The Liberals programs are not usually beneficial to the larger grain farmer consisting of only 20%
of the total, given their tendency to cap most programs so only the average size farm gets full benefits.

The PC's tended to drop these programs and come up with programs like GRIP which were better at treating all
farms equally, but still not thought out enough to be fair or sustainable.

Now are we to trust the Liberals with coming up with a new "Mother" of all programs that we should just 'take' or 'leave'
with a long-term commitment? I don't think so.

They should allow a lot of input from many farmers this time, or it will only be another short lived program again.
It might be better to have most of these proposals discussed in detail by farmers rather than just spokespersons before
implementing them. Maybe then the end result might be compatible with what all farmers need and taxpayers can afford.
Maybe some linkage is needed with trade issues. After all if it wasn't for the unfair subsidies in the grain sector, the
huge problems that sector faces wouldn't likely be as bad. If a world trade agreement has been agreed to that is unfair
to one sector that sector should be compensated. How can diversification be seen as good when it can result in bankruptcy
with the poor to non-existent crop insurance coverage we have. With present rules, you need 10 years to develop adequate coverage
for each crop grown. The result is that 2 farmers farming side by side on the same quality land, using the same inputs and farming practices
can have insurance coverage's where one is double the others. The Grip program had this same inequity built into it.

It's not right that a program like CFIP treats each sector alike, assuming that averaging out their income is fair. If for example
the grain sector has had to compete with Common Market and USA subsidies for 15 years, how can an average net income be fair?
Until these huge mistakes are spotted before the programs are implemented they are wasting their time coming out with any new programs.

[cowman]

I also read the article in the Western producer and I really wonder if the whole thing will be another gong show. Vanclief says it will be a long term committment or nothing. He talks about more money but I doubt it. To get this program we have to meet certain conditions, such as an environment and traceback. I suspect we will be required to jump through the hoops for the same money they put in now.
We all know Canada can't compete with U.S and E.U. subsidies, or at least they won't. I doubt any country will pay us enough to make up for these subsidies, because we have an environmental program!
I hope I'm wrong but I suspect this is more smoke and mirrors to keep us down on the farm!

[ianben]

Subsidies are not the bed of roses you all seem to think.

Charlie has it about right! They get all swallowed up in rents, land prices and suppliers charging what they think we can afford.

There is no government plan that can cope with the price volatility we see today. There is no government plan no matter how well devised that some farmers won't use to their best advantage. It can never be fair.

I believe price volatility is the problem.

Don't really understands exactly what causes it.
I think it could be speculators carrying all our risk reacting to the mere perception of a change.
Or our belief we should sell all we produce.

However I believe if we could create more stability most of our problems would disapear no matter what system we work under.
Any ideas or comments Bob

Regards Ian

[ianben]

Vanclief is a gelding so expect nothing. Canada has a smaller economy than some developing countries so expect less than nothing.

[bob4choice]

Ian,

I agree that subsidies are not desired, but given the fact that the Feds have negotiated the Trade Agreements we have, they can either do something to stop the foreign subsidies/help offset the damage to us or do nothing and watch the grain industry slowly die, which surely it will. If Governments can't cope with what THEY have created, then they had better get out of our face and stop distorting the market. The way I see it, Central Canada has done quite nicely over the last 2 decades. The Trade Agreements seemed to give them all the advantages with minimal disadvantages. The Dairy industry gets to have it's cake and eat it too. (Having a protected market as well as the right to export surpluses looks pretty nice to me.) The western cattle and hog industry hasn't exactly been hurting either with a constant feed grain surplus enforced by our CWB monopoly. But when a shortage does develop, conveniently allows cheap corn in. It's not that easy to forget the early 90's when Manitoba farmers had to burn their durum crops when they could have sold them to the US for good salvage value because of disease or when several others were put in jail for trying to get a fair price for their feed barley.

I don't believe the speculators are doing any harm. If anything, in their absence the volatility would be worse, as any price direction signals would be delayed or non-existent and equivalent to the like's of our useless CWB PRO's.

There is no way that the grain industry can carry on as is. It is necessary to be profitable when crops are good so you can survive the droughts. Over the last decade most crops were barely breaking even with bumper crops.

In my opinion, the only way to possibly survive the current situation, is to go back to half fallow and only grow a cereal. This rotation has the least risk when prices are likely to stay low and moisture unsure. It is a shame when we know we can compete with anywhere else in the world if there were no subsidies. Under continuous rotational cropping we were growing much more grain but at a much higher unit cost.

The other point I would like to make is that when I and my neighbors go back to 1/2 fallow and no pulse crops there is going to be a severe depression in the prairie economy. There will be hundreds of layoffs in the pulse crops industry and existing non-pulse shipping plants will be competing for a smaller annual crop too. And many farmers including myself will likely be loading our own railcars to cut our costs even more. The result will be a bigger loss than ever to the rural communities. Once the damage is done, we may not see any re-growth in our lifetimes as optimism will be hard to come by.

Regards Bob

[cowman]

Bob: I'm not going to try to defend the Canadian wheatboard or our govt.,but when you talk about trade deals being not good for the west you are wrong. NAFTA has been very good for the west. Do you know how much oil and gas moves south? And how much American investment has developed the oil patch? Why do you think Alberta is booming?
Do you realize how many cattle and hogs go south? Two big American packers kill most of the cattle in western Canada.
You talk about what a sweet deal the beef and pork industry have at the expense of grain...well take advantage of it! Build a feedlot or pig barn and cash in!
The feed barley was sold into that American market,by the CWB. And it's not cheap American corn...that's the going rate and it is not being dumped! If you expect the Americans to take your feed barley then you've got to accept their corn...that's free trade.

[jgstuart]

Although I regularly check out the "Commodity" section here on Agriville, I have not posted for some time. However, I on this occassion I felt that I had to respond to this thread and to "Cowman's" comments in particular.

There is no question that what you say about Free Trade is true. It is a tremendous boon to the province, and I don't think many would argue that point. But I feel I must comment on your statement about U.S. corn which is currently coming into Canada. While it is true that the price Canadian feedlot operators pay for corn is the "going rate" in the U.S. plus whatever freight is necessary to get it here, I would argue that it is indeed "cheap corn". The system of internal supports (ie LDP payments) available to the U.S. corn producer insulates them from market signals and generally has the effect of producing more corn than market conditions would normally warrant, thus lowering the price. However, that is not the price that the U.S. corn producer ultimately gets.

For those of you not familiar with the U.S. LDP program it is essentially a target price set by the government. The payment the producer recieves is the difference between the market price and the LDP price. He can claim his LDP payment at anytime. Because of this, the corn producer's marketing strategy consists of trying to pick the"market low" (usually during harvest pressure in the fall) in order to claim the largest possible payment. He then holds onto his actual production to sell later in the year, presumably when cash prices have improved. In theory then, the price of corn could go to zero, and it would not have a dramatic effect on the number of acres planted down there. So what's my point? Should we simply shut off the supply of "subsidized" corn coming into Canada? There is no doubt that would have a positive impact on the price the prairie producer receives for his grain in the short term, however it is not quite that simple. This would put the Canadian feedlot operator at a considerable disadvantage to his American counterpart with whom he must compete, and it would not be long before you would see our cattle feeding industry relocating on the other side of the border.

Ever since the demise of the Crow Rate, our feedgrain market has pretty much become a domestic affair, so it is in the western feedgrower's interest to have a vibrant feeding industry here in Canada.

So let's recap........ in effect we have a U.S. subsidy which supports the U.S. corn grower and because it encourages overproduction and by extension lowers the price of all feedgrains, indirectly subsidizes the North American feeding industry. The only one that doesn't seem to benefit in all this is the Canadian feedgrain grower.

As far as your suggestion that feedgrain growers should perhaps just get out of grain production and "cash in" on a profitable industry by setting up their own feedlot operations, I suppose that is a possibility. In fact I see signs of more of that happening all the time. But obviously that is not an option for everyone, and in the long term I don't think that the feeding industry would like to see the demise of prairie grain production and leave themselves dependent on U.S. feedstocks. The fact of the matter is that we need each other. Somehow a balance must be found because right now it is the grain producer that is suffering.

[cowman]

I agree with most of what you said and you are right about finding a way to put more money in the grain sector. The American plan sure sounds good to me! I don't raise any grain but I rent land out to my cousin on a crop share basis. Sometimes we both wonder why we bother! There is another reason why you can't close the border to corn...they wouldn't stand for it! Americans are great little free traders as long as it works for them! And hey, they are the only game in town so we have to play by their rules!
Also you said the grain sector was hurting big time,which I'm not disputing, but the cow/calf business is not all that rosy right now with the drought.

[jgstuart]

Well I'm not going to argue with you on your views of the U.S.'s attitude toward free trade. LOL. As far as your comments about the plight of drought ravaged cow/calf operators are concerned, I am in full agreement. Drought can be devestating whether you are in cattle or grain. I guess that is one thing we have in common. I hate to think of what will happen should we experience another dry year.