Farm Marketing: Sometimes The Race To Cheap Can Be Avoided

It is about that time of year again. By the time you read this I might be planting corn even though rain has inundated southwestern Ontario over the last few days. Sometimes in this part of the world March can be so beautiful we start thinking of planting corn quite early. In fact, I have planted corn when it was snowing in the field, but that doesn’t seem like this year. We can’t control the weather, but it sure controls us.

Of course, the world doesn’t work that way, because if we did we might send bad weather to different parts of the world to make that corn market light up. We all know the problems in the corn futures market. It might be the darkest before the dawn of something better, but its sure getting old. Needless to say, our futures market is still one of the best ways to determine cash grain prices. It might be frustrating at times, but it does work. It just takes so long at times to get those prices we all desire.

Marketing is not really a sexy topic. I know that I really enjoy it because it ties in some of the very basics of agricultural economics. However, increasingly I believe that for the most part farmers don’t enjoy marketing and it’s likely that they never will. I continue to learn about it even in a very fluid-shifting world. I often say that every year is different in farming and increasingly I’m seeing the same thing in our grain markets across Eastern Canada.

I say that because farm marketing is not easy. I have had long career writing about agricultural economics and agricultural markets. Over that time I have seen many different opinions on how farm products should be marketed. In my youth, I would often see debates about how much marketing power farm marketing boards should have. Of course, in Canada we have supply managed agricultural commodities like dairy and feathers, which are highly regulated, helping to guarantee farm profits. At the other end of the spectrum we have horticultural products, which are often sold on the free market, which can be ruthless in its character. Where strawberries might be bought for a fruit tray at a fancy grocery store versus the same strawberries being canceled that day by the buyers only to find themselves put in jam. In between of course we have grains and livestock, which are generally traded on futures markets. Cash prices are derived relating a futures contract with a basis value to give a cash price.

The goals of these different farm-marketing strategies can vary widely. However, if you leave all agricultural commodities to their own devices on the free market, it is the race to cheap. With agricultural commodities being indistinguishable from each other (one bushel of beans is the same as the next), prices generally are in a race to the bottom. That satisfies a lot of goals, those cheap prices. Politicians especially love those cheap agricultural prices because there are a lot more food consumers than their food producers. Needless to say, that helps the food processors that want the same thing. It is only through the work and diligence of farmers and some politicians over the years that changed that paradigm in some way. That has given us the supply managed sector in Canada as well as what’s left of the semblance of agricultural safety net policies which attempt to stabilize farm income. It is far from a perfect system, but in my mind any time the primary producer wins out and garners a little bit more of the consumer’s dollar it’s a very good thing. That’s why I support the way milk and feathers are priced in this country.

At the present time in Ontario we have an example of bad farm marketing policy being continued by the Ontario agriculture minister. Over the last few years the collective bargaining agreements between vegetable growers and processors was broken up by the previous Liberal government. The biggest part of that affected tomato production in southwestern Ontario. Where I am from tomatoes formed the foundation of our agricultural economy. They garner the highest profits and stimulate all kinds of economic activity within the area. With the election of the new government in Ontario there was hope that the collective bargaining process for tomatoes would be reenacted. However, the new minister called for last week a new open marketing concept for processing vegetables including direct producer processor contracts. Essentially, what this does is reduce prices to farmers. It erodes the underpinnings of the tomato economy. However, it satisfies the politician’s thirst for cheap food in the processors desire for cheap product. It passes the huge financial risks down to the farmers and it is so flawed.

It begs the question will the same politicians do the same someday for the Canadian dairy and feather farms? I mean, aren’t there lots of people willing to build barns to grow milk, chickens and turkeys cheaper? Would a futures market for milk, chickens and turkeys work in Canada? Or, does our farm marketing of those commodities work pretty good now?

Farm marketing is never straightforward in Canada. Markets will work if politicians allow them. 2018 and 2019 shattered that hope. The Ontario agriculture minister chimed in with the same last week. However, when farmers stick together sometimes the race to cheap can be avoided.