Agriculture operates in both a domestic and global context. Over the last several decades, global forces seem to have dominated domestic policy as Canada grappled with massive farm subsidies offered by European and American governments; trade embargos on beef and pork; drought; and disease threats for beef, potatoes and chickens. Recent increases in fuel costs have increased farm operating costs. Consumers are wary of chemical use, genetically modified foods have faced scrutiny and doubt, and the demand for organic produce continues to rise, forcing traditional producers to change.
On the one hand, these “threats” point to a continuation of challenges for farmers. On the other hand, increased food prices, widely predicted to remain strong as growth in India and China propel the demand for food, offer prairie farmers a more optimistic future for the first time in several decades. In 2008, many farmers were looking forward to large crops and good prices, a rare combination in Canadian agriculture.
The central argument here is that Canadian agriculture in general, and prairie agriculture in particular, must benefit from a policy that escapes its “depression era” focus. Policy must evolve from an income support system that resembles social assistance to a business support model. I argue that recent agricultural policy in Canada, especially on the Prairies, while making important steps in the right direction, has offered contradictory incentives, combining elements of a social safety net for families with industrial policy. This contradiction reflects the dichotomy within most Canadian farms that combine features of a family operation with business management common to corporations. The goals of income support (safety nets), risk management (production insurance), environmental responsibility, food safety, and promoting capital investment for expansion are supported by myriad subsidies, penalties, regulations, and moral suasion that present an incoherent context for meeting international competition and sustaining domestic economic prosperity.
I do not argue for extreme or rapid policy transformation; rather I maintain that appropriate policy should focus on the growth of farms as businesses that do not require chronic subsidization, thereby creating a sustainable agricultural sector. Current policy certainly pays lip service to this, but many other actions undermine fulfilment of this goal.
The past three decades have witnessed steady changes in the structure of the farm economy in the developed world. These trends include the aging of farm operators, fewer people involved in farming, increasing concentration (fewer, but larger farms), increased concentration of revenue among larger operations, and convergence in family incomes for agricultural and non-agricultural households.
New Zealand and Australia offer insights on the transition to a deregulated farm sector. In both countries, deregulation has improved the viability of the farm sector, but at the cost of hastening the exit of many long-time farmers with unviable operations. This social cost would seem to be an inevitable price in the transformation of agriculture and a major impediment to the enactment of a business-focused agricultural policy. However, drawing policy lessons from New Zealand and Australia requires care, especially because these countries are on isolated continents and islands. The scale and scope of agriculture in New Zealand is smaller than in Canada, and a macro-economic crisis forced the government’s hand—extreme crises required extreme action.
Canadian and prairie agriculture face key challenges in four areas. However, the challenges in each of these areas also offer important opportunities for agriculture to flourish in the next decade.
- Environment—farmers are facing challenges in meeting increasingly stringent environmental regulations.
- Realignment of global competition—new competitors for prairie grains will require farmers to extract efficiencies and innovate.
- Food safety, food quality concerns—farmers must meet new handling standards, especially in livestock; at the same time, consumers are demanding organics and local food, thereby creating the opportunity for smaller niche farms that can compete profitably.
- Restructuring and succession—the imminent retirement of many farmers creates challenges in financing succession, but also will allow farms to exploit economies of scale.
Policy that would benefit prairie agriculture consists of four initiatives:
- rationalization of all income support into a single program;
- an injection of cash to accelerate the restructuring of farms and farm ownership;
- deregulation for competitiveness; and
- reinvigoration of support for basic research and extension services.
It is tempting to think that the varied and complex problems encountered by the farm sector in prairie Canada necessitate varied and complex policy. However, the core of any agricultural policy must be a program to reinvigorate the farm as a self-sustaining business. The increasing patchwork of programs creates myriad cross-cutting incentives that obscures the stated intent of having the market drive the welfare of the farmer. The priority for agricultural policy for prairie Canada must be to create viable farms than can compete globally and meet new consumer demands. The emerging era of strong prices and opportunities in organics, local consumption, and the certain retirement induced restructuring, presents a unique window of opportunity for governments to forge such a new policy.