USof A Farm subsidies

[TOM4CWB]

Charlie and Lee;

I see a DTN article on USA Farmland Real Estate prices....

In 1970, Farmland worth $200,000 was worth just under $900,000 in 1999.

THe estimated value of the 1999 land was just over $600,000, without government farm subsidies... close to 30% of farmland value is created by subsidies in the USA.

TO be globally competitive, the subsidies must continue, or else huge write down's must occur in the Farmland values...

In the WTO negotiations... I cannot see how all these factors will reconcile...

Canadian dairy / supply management quotas are in the same situation...

Western CDN "designated area" farmers have been mostly spared this problem... as CWB subsidy payments came out of our equity...

Canadian Farm land values must increase to more competitive to US Values... as the CWB is phased out...

How can this round of the WTO ever get resolved, and reduce subsidies, without unbelievable economic re-evaluation(depreciation) of property and displacement of tremendous numbers of farmers?

[charliep]

I am not so sure your question Tom4cwb.

The problem you talk about is more a US and European one. How long will these societies be willing to maintain welfare programs that maintain wealth in one group of society? If the world economy falters more (I think there is high risk), can these econonies afford to carry this group? I realize there are issues around rural development and communities.

The changes you comment about are taking place anyway. Farms are getting bigger because of economies of scale and improvements in technology (how much more land have been able to seed with the advent of air drill technology). The sad fact (not my choice) - a farm is big or is supporting family expenses through off farm employment.

The other group in here is landlords. I have sympathy for the widow in Calgary/Edmonton that relies on the farm rent for living expenses but I get tired of hearing about some of the obscene cash/crop share arrangement that reflect none of the risk of farming in the current environment. I have seen more long term rental arrangements terminated in the past year for a couple of bucks an acre only to go to a neighbor. Should farm programs maintain the wealth of this group?

A last comment. If you live in Alberta, your land values reflect the impact of government support relative to our neighbors to the east. Haven't looked latedly but has anyone shopping the land market across the prairies? A tongue is cheek comment is if you buy land in Alberta, you are investing and if you are buying land in Saskatchewan/Manitoba, you are buying a productive asset. My suspicion is a lot of the cow calf pairs we moved east because of drought are not coming back with lower land cost a major reason.

[TOM4CWB]

Charlie;

The question was:

"How can this round of the WTO ever get resolved, and reduce subsidies, without unbelievable economic re-evaluation(depreciation) of property and displacement of tremendous numbers of farmers?"

Can this round of WTO agricultural talks possibly put "the toothpaste back into the tube", as the US, EU, Ontario/Quebec,and now even Alberta(Revenue Insurance) governments are all primed and ready to support the agricultural community, and protect each resident group from the other countries support programs.

Whenever world grain prices increase significantly... huge increases in production are initiated... and create an even bigger surplus... with even lower prices yet the result!

How can this system be sustained, yet who will "blink" and stop the snowball effect?

[charliep]

We'll have to get others involved.

I like your analogy of putting toothpaste back in the tube because I think its pretty appropriate. The chance of the US and EU giving up their farm programs is somewhere between zero and none.

At the same time, the new emerging exports (South America and Europe/FSU) on the scene. They are on the scene and will continue to grow their market share.

At the same time, there is an increasing gap between food needs and ability to supply in many parts of the world.

I have no answers other than beating consessions out the the US/EU is not likely to work. I think we have to have a strategy that identifies competitive advantage, customers that have a fit with what we produce and a focus on profit.

[charliep]

Just as a note, the world does not have big grain surpluses. Perhaps with the help of increased southern hemishere crops, we have a world that relies on just in time shipping.

[wedino]

French President Jacques Chirac's call for a temporary moratorium on export subsidies at a summit with African leaders.

This surprises me, coming from France!!

News from Reuters


Canada Urges G7 Farm Subsidy Cut After Chirac Talk


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18:16 GMT-05:00 Saturday, February 22, 2003

By Gilbert Le Gras

PARIS (Reuters) - Canadian Finance Minister John Manley urged his partners in the Group of Seven (G7) rich nations on Saturday to cut farm subsidies, one day after French President Jacques Chirac's call for a temporary moratorium on export subsidies at a summit with African leaders.

Manley told his colleagues from the United States, France, Britain, Germany, Italy and Japan -- major traders of food on world markets -- that reducing agricultural subsidies is the best way to push global trade liberalisation talks forward.

"Making headway on trade in agricultural products is important. There was broad support for that, I'd say," Manley told reporters at the end of the G7 summit.

The French position was not expanded upon on Saturday since French Finance Minister Francis Mer chaired the meeting, he said.

"He didn't bring forward anything from the closing remarks President Chirac made yesterday (Friday). We noted them in the newspaper, but I wouldn't say they were part of the discussion," Manley added.

Chirac's Africa summit comments on Friday raised eyebrows at the G7 meeting.

France has led opposition to reforming Europe's Common Agricultural Policy and resisted rapid liberalisation of farm subsidies during the latest round of global trade talks.

One Canadian official said British and American delegates were receptive to Manley's briefing.

The EU's CAP is a 40-billion-euro-a-year system of farmer aid, export subsidies and minimum price guarantees.

Agriculture accounts for roughly half of global economic output and developing nations from Africa, Asia and Latin America have long complained export and production subsidies by rich countries squeeze them out of world food markets.

Canadian International Cooperation Minister Susan Whelan and other senior Canadian officials said on Saturday they were surprised and encouraged by Chirac's comments but were unsure they would translate into firm commitments at the G7 meeting.

The G7 draft communique only vaguely referred to trade in its final sentences.

"The European Union continues to show leadership within the WTO and we are committed to completing the Doha negotiations before the end of 2004. This is a key strategic goal of the European Union," European Commissioner for economic and monetary affairs Pedro Solbes told reporters.

The use, or abuse, of farm subsidies has been a chronic source of disagreement between G7 nations for years and other frictions emerged at this G7 meeting of finance ministers and central bankers: U.S. efforts to nudge the European to raise budgetary spending in a bid to stimulate economic growth.

Bank of Canada Governor David Dodge said he was concerned about 'extraordinarily weak' demand in continental Europe and Japan since that led to medium-term worries about how part of the world could carry the rest of the world.

European officials, however, are concerned that an increase in budget deficits as a proportion of gross domestic product could violate their EU growth and stability pact commitments.

Much of the meeting's focus, various delegates said, centered on what the European Central Bank could do to help on the interest rate front because of the fact that cash-strapped European governments had little leeway to for big public spending plans to promote growth.

U.S., British and Canadian interest rates have already been cut to more than 40-year lows and Japanese rates have been close to zero for years.

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[ianben]

From 2004 EU subsidies will be decoupled from production and support prices dropped to below world prices under proposals being disscussed at this time.

Looks like it will make a real difference at farm level. Exact details not yet avaiable but looks like land values and definatly rents will come down.

10% land to be taken out of production for ten yrs and managed for the enviroment whatever that means?

This is a change as canola for industrial use was allowed to be grown on this set-aside land hence biofuel industry. This must now come from the 90% area allowed to be cropped and being encoraged finacially for the enviroment of course.

As subsidies no longer linked to crops or stock some farms may not grow or produce anything not an option with todays system when payments are based on acres and numbers of stock.

Final outcome will be interesting but I think will make a real difference one way or the other.

Not sure it will ensure the survival of the family farm but arn't we finished anyway?