Published Monday, March 26th, 2007
Re: Cultivating the Farm Vote; page A12, March 25th 2007
The editorial rejected the government’s intervention in the free market and predicted the creation of a farm welfare state.
That would be perfectly correct if agriculture was a free market and all players followed the rules. Unfortunately, it is far from a free market and foreign players dictate the rules of the market. The editorial confused the issue. Subsidies to farmers are not about the cost of production, but rather about the failure of market prices.
A free market balances supply and demand, where inefficient or excessive supply exits the market, as the editorial explained. Contemporary international agriculture has little to do with supply and demand, as demonstrated by our historically low reserves of food in the world today.
Contemporary agriculture is all about the power of suppliers versus the power of demanders. On one side, we have millions of independent farmers worldwide buying supplies from and selling commodities into the market with little or no individual negotiating power. On the other hand, large trans-national corporations have consolidated market power. They control seed, machinery, fertilizers, and commodity markets. Therefore, farmers are price takers for both farm inputs and farm produce.
The second failure of the market comes from extensive and long term production and export subsidies in the US and the EU. When the world’s major food exporters and consumers have decided to interfere with commodity prices, then Canada can little to correct it. We cannot simply close the border as we are also a food exporter. We cannot impose import duties as our other food exports are connected to imports. We must therefore match foreign subsidies with appropriate income supports for our farmers as well.
By Tom Manley