Stop The Charade: Margin Based Agricultural Stabilization Doesn’t Work


Its been a long seven months since I co-chaired the 10,000 farmer rally on the steps of the Parliament Buildings in Ottawa.  Thankfully farm prices have improved.  Or maybe I should say, luckily they have improved.  Seven months out since that heady day, our agricultural policy world is not only stuck, it seems stuck in reverse.

The Conservative party long out of power seems to be throwing their rural base in the dumpster.  Campaigning next spring in the 2007 election, I can see visions of Conservative candidates defending CAIS.  Liberals with their cost of production and Ontairo RMP(Risk Management Policy) in their pocket may be laughing all the way to the polls.  How things change.

If you are wondering what I’m referring to look at what happened last week I Calgary.  That’s where the federal and provincial agriculture ministers met to map out future agricultural policy direction.  If you want to read the communicque go to http://www.agr.gc.ca and click on Newsroom.  An important paragraph I want you to read is below.

“Over the past ten months significant progress has been made on a new suite of business risk management (BRM) programs to address concerns identified by producers. Vast improvements have been built into what is becoming a new margin-based income stabilization program. In principle, and subject to the appropriate authorities, agreement has been reached on a separate disaster relief framework, and on options for considering the extension of coverage under production insurance to livestock and additional horticulture crops.” (AAFC Communique)

This is all so very wrong!  Ok, I’ll say it again.  This is all so very wrong!  Take it from me, from experience.  Margin based programs like CAIS do not work.  Our present and past experience with CAIS is testament to that.  All margin based programs do is limit government exposure to large transfers to Canadian farmers.  They fail to attack the farm revenue problem at its source.  They are impossible to administer and nobody understands including the ministers or the bureaucrats, which administer their own rules and criteria.  Farmers last April 5th emphatically said that.  However, the federal and provincial governments across the country have ignored that.  Unbelievable!

In many ways this is very difficult to understand.  Reason being much of it doesn’t make common sense.  In fact even the federal minister has said farmers need something “bankable”.  However, I think there is nervousness in the rural Conservative caucus about this.  Tying yourself electorally to a new CAIS will be like a millstone around their neck all across Canada in the next election.

Keep in mind this is all about “Canadian agricultural economics.”  That’s where sometimes we lose our way.  Regrettably for me that means many of our politicians and bureaucrats.  However even worse for me is that sometimes farmers themselves don’t really understand why Canadian agriculture needs a revenue safety net to thrive.  Believe me, its about much more than “more money.”

Intrinsic within our agricultural economics is the phenomena of “inelastic demand”.  It’s many things but at the end of the day, it means that agricultural commodities usually end up in surplus.  This is mainly but not exclusively because farm prices move widely with small changes in production.  It leads to chronic low revenues which in turn leads to chronic low incomes across farm country wherever that may be.

Governments in the western world have responded to this buy either protecting or subsidizing their farmers.  “Domestic food production” is important (US, Japan, Europe) or taken for granted. (Canada)  Canada has responded historically to some degree by building a supply management sector and trying to subsidize in an uneven way everybody else.  Getting is right has always been the Canadian challenge.  Drafting the APF in the last year of the Chretien adminstration was the latest attempt by the Canadian government to get it right.

You all know what I thought of that then a now.  It was mind bending poor agricultural policy and vision, most of which has been widely panned.  It makes me think they cannot make that mistake again.  However even with that experience “policy makers” are putting together a “margin based” program to stabilize farm income.  It doesn’t give me confidence that APF II will be any different.

There will be consultations.  In fact they are starting next month and will continue into 2007.  You can learn more by clicking on http://www.agr.gc.ca/pol/consult/index_e.php?s1=public.  I would surely love to give my two cents.  Sure I love farm rallies, I think they have there place.  However, I don’t want to be at a farm rally in 2009 because “margin based” programs don’t work.  I’ll tell you that right now.  It’s a flawed system, which we have had much experience with.  What’s needed is a federal program, which focuses on provincial needs, whether that’s RMP in Ontario, ASRA in Quebec or an acreage based system in the west or something in between.  There is a better way.

The challenge is to stop this current charade about “margin based” programs.  At the end of the day, if we start over now, it’ll save a lot of money and aggravation in the future.