Farmers for economic freedom
Updates from the Canadian Farm Enterprise Network. Several of the items appearing here originally appeared in an email list operated by Dwayne Leslie at http://www.prairielinks.com
Farmers need freedom, not bailouts
By Dennis Rice
The past several years have given us something rarely seen in the farm economy: rising commodity prices and rising incomes. Farmers have responded by increasing investment in their farms in the hope that returns would continue to increase. But those hopes have now been clouded by the panicky state of the world economy; farm income is in a steep decline due to falling commodity demand. Worse yet, a lot of the past investments made by farmers were very expensive with land, machinery and rents priced at exceptionally high levels. The main problem facing farmers today is how to pay off those investments in a climate of declining returns.
Most mainline farm lobby groups have a standard and by now tiresome response to this problem: just have the government put more money into the hands of farmers through subsidies, thereby giving them the means to pay for their inputs. But whether financed by plundering budget surpluses or simply raising taxes, such strategies are unbelievably shortsighted. It is time to move beyond proposals that treat taxpayers as a bottomless pit and adopt sensible measures that will allow the farm economy to prosper beyond the next election.
With that in mind, farm lobby groups ought to be pressing the government to get its own economic house in order. Instead of thinking about ways to spend dubious surpluses, governments should be slashing spending and paying down debt. Furthermore, they ought to be creating a climate in which job creation and growth is encouraged by cutting taxes and eliminating regulation, which benefits farmers immensely by lowering their input costs. If farmers have lobbied governments for safety nets in the past and have been successful, there is no reason they cannot lobby for economic freedom and be just as successful.
It is also crucial that farmers lobby for flexibility in marketing choices. If a farmer is to be successful in a tough economic climate, he has to be able to make on-the-spot decisions about marketing and be willing to change strategies frequently. He can't do that if he has to wait for a gaggle of central planners to do his thinking for him.
On a personal level, the cardinal rule for any businessman (and farming is a business) is to take responsibility for his own life and his own decisions. No one should farm based on the expectation that others will automatically be forced to come to the rescue once things get rough. Instead, every farmer ought to build a reserve, or a personal safety net, that can see them through a tough spell. That reserve might be some form of savings, spare equity or a sensible diversification strategy.
In view of our troubled economic climate, individual farmers ought to take steps to lower their debt-to-equity ratios immediately. They should put off major equipment and land purchases for the time being, and make sure rent contracts are short-term. If we are entering a period of sustained deflation, then land, equipment and rents are likely to be much cheaper in the future. The challenge for farmers is to come up with ways to employ those cheaper inputs to raise farm products and sell them for less than they are getting right now. That task will be made much easier if the government stays out of the way, allowing rents, land and equipment prices to fall to levels at which the long term profitability of farming can be restored. If it insists on trying to intervene, then input costs will stay where they are and farmers will find profit levels continuing to sink.
Not surprisingly, many farm lobby groups rebel at such "harsh" prescriptions. But there is no alternative to basic economic reality; no one can farm fantasyland and make a living. In the end, calling for freedom and free markets isn't really a huge change anyway. Farmers have always recognized the value of hard work, individual initiative and increasing productivity. That's how we progressively expanded our farm economy for over a century. Let's not jeopardize that expansion by creating a culture of dependency on government handouts.
Dennis Rice farms near Starbuck, Manitoba.
Estey at Bat
By Craig Docksteader
In just a few weeks, Justice Willard Estey will submit his final report on the Grain Handling and Transportation System Review to the federal Minister of Transport. To anyone even casually following the process, it's obvious that the task has been daunting.
Justice Estey was not commissioned to simply recommend improvements to the system, but to "...conduct a comprehensive, forward-looking review of the handling and transportation system for prairie grain and grain products and to develop recommendations and related implementation plans to:
Since then, the number of reports and studies conducted pertaining
to the issue number in the hundreds. Justice Estey reported in his interim
report that the Review had ninety pieces of relevant research in hand,
of which eighty percent were authored since 1995. That's an average
of three studies
The fact is, there have been few issues more studied and less improved than that of grain handling and transportation on the prairies.
But as daunting as the job may be, identifying solutions may be the easy part. The biggest challenge could prove to be ensuring that, as stated in the Review's terms of reference, "The recommendations and implementation plans will reflect, as much as possible, a high degree of consensus amongst system stakeholders." In other words, the Minister of Transport wants the recommendations to be not only practically feasible, but politically palatable.
On many of the key points, it will be next to impossible to have recommendations which reflect both of these elements. While there is growing consensus on some issues, others remain hopelessly polarized.
For example, there is broad-based support to see the rail transportation monopoly broken up. Estey will almost certainly recommend moving towards the implementation of common railway running rights, where tracks are made accessible to other carriers on a competitive basis. This would not only address the lack of competition in rail transport but could also provide an opportunity for the utilization of branch lines which might otherwise be abandoned.
On the other end of the spectrum, it is highly unlikely that Estey will recommend sweeping changes to the Canadian Wheat Board's role in grain handling and transportation. In light of the current political climate, including what will be the recent appointment of a new CWB board of directors, Estey is likely to tinker slightly but refrain from meddling. The unknown is whether his final recommendations will lean towards more CWB involvement in the system or less.
Justice Estey has had his work cut out for him. The transportation and handling system fails to operate efficiently or effectively, functions in a shroud of unaccountability, and requires systemic changes. The numerous submissions received and meetings conducted during the review have publicly exposed the system's flaws once again and unveiled the discontent of stakeholders. Now the ball is in Estey's court. By December 31st we'll see how far he hits it.
Something Significant is Happening
By Craig Docksteader
It should come as no surprise that many people are paying only casual attention to the trials underway in a Regina courtroom. Two years ago it was front page news, but now the fact that twenty-three farmers are on trial for illegally exporting their own grain barely raises a ripple. Relegated to some side-bar on pages of daily newspapers, the story gets dutifully noted, but buried.
Perhaps it's because the issue is now largely seen as yesterday's news story. We've been there, done that.
Two years ago it was fresh and provocative. Today, the reaction is muted and largely polarized. On the one hand, some observers consider the charged to be courageous defenders of individual freedom, while others simply see them as petty law-breakers, unwilling to submit to the processes of democracy.
Perhaps some of the disinterest is because the strategy of legally challenging the authority of the Canadian Wheat Board's monopoly has so far proven to be unproductive. A number of times over the last two years, there was almost an electric anticipation that the future of the monopoly might be in jeopardy. Many farmers were openly questioning whether the monopoly could withstand a legal or constitutional challenge, or would come crashing down at any moment. Rallies, debates and town hall meetings took place across the prairies, hosted by advocates on both sides of the issue, anxious to shore up public support for their respective positions.
But while the court challenges significantly increased public awareness of the issue, the reality is that today farmers have no more marketing freedom on Wheat Board grains than they did five years ago. On the contrary, many of the dissenters have been fined, reprimanded, and even done jail time for their part in challenging the law that protects the CWB's export monopoly. From a legal standpoint, the CWB's monopoly status appears to have been reinforced, rather than weakened as a result of coming under the judicial microscope.
The other complicating factor is that it was never supposed to take this long. Interest in most news stories can be sustained for only a brief period of time, but not two or three years. Even the dissenters themselves appear to be tiring. Some are pleading guilty to charges just to get out from under the burden of it all.
Others are resigning themselves to their judicial fate and wondering how much longer before it's over. Nobody anticipated it would take this long, or cost this much, with so little to show for it all.
From the perspective of the uninitiated, it's over. All that's left is for the credits to roll across the screen as some viewers sit dumbfounded trying to make sense out of it all while others are already switching channels.
But not everyone sees it this way. In fact more and more people are recognizing that something significant is happening. For the past five years, the line has been quietly moving at the grassroots level. While hardcore, vocal defenders of the status quo will always be around, a growing number of producers are no longer confident that the status quo is the preferred method of doing business. Some have moved only marginally, while others have moved significantly, but the shift in public opinion at the farm gate level is all moving in the same direction towards marketing choice for producers.
In many ways, low commodity prices and the election for directors of the CWB have granted a temporary reprieve to the issue. Producers are preoccupied with their financial survival, and have no effective opportunity to promote public policy changes until the current political process plays itself out.
But before long, the dust will settle. Commodity prices will bounce back and producers will realize that electing a board to a government monopoly has changed little. In some ways it doesn't matter how long this process takes, because while producers are waiting, public opinion continues its shift.
Craig Docksteader is Coordinator with the Prairie Centre/Centre for Prairie Agriculture, Inc.
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