Farm & Countryside Commentary (Canada)
by Elbert van Donkersgoed
September 8, 2003

Get ready for more rhetoric about the power of markets and competition to fix the farm crisis. Get ready for more talk about trade liberalization and about capturing new markets.

The World Trade Organization's fifth ministerial conference for multilateral trade negotiations opens in Cancun, Mexico this week. The official goals for agriculture are about fixing markets:
• Substantial improvements in market access, meaning lower tariffs and higher access quotas.
• Reductions with a view to phasing out all forms of export subsidies.
• Substantial cutbacks in trade-distorting domestic safety nets.

What if tariffs and quotas and export subsidies and domestic farm safety nets are not the cause of the crisis - not the cause of the over-supply in world grain production? The voices supporting farm trade liberalization seldom include in their elaborate rationales for trade deregulation any explanation of the causes of the crisis.

The voices focus on solutions. Some argue that a free market will draw resources to the most rewarding activities, creating big benefits for an economy. Others emphasize that more competition will free farmers to do what they do best -- produce. Those who cannot out-produce the rest of the world can exit the industry. Still others encourage a future where farming is consolidated into a few firms that control supply chains from farmer to consumer, with enough market clout to control overproduction and the ability to do without trade protections.

What are the causes of the crisis? Farming is one of the most entrepreneurial sectors of our economy. Develop an advanced production technology; refine a management system or increase output from existing resources and your achievement will spread like wildfire throughout our farm economy. Consider how, in half a decade, genetically modified plants have become commonplace in North American farm fields.

The causes of the crisis are simply supply and demand. Agriculture's enthusiasm for production gains has outstripped demand. Wheat prices are very likely to strengthen in the months ahead -- not because of any negotiations at Cancun. Europe's heat wave has devastated wheat fields. The agricultural goals of the Doha round are a recipe for full-throttle production around the world -- a formula for ever-lower farm gate prices.

The Agricultural Policy Analysis Center, University of Tennessee, has documented the disastrous results of the U.S administration abandoning production and price stabilization tools in the 1996 Freedom to Farm legislation. Opting for all-out production and trade liberalization has resulted in record low prices -- a 40 percent plunge in world prices for corn, wheat, soybeans and cotton since 1996.

The crisis is rooted in over-supply. How much longer will we swallow the rhetoric about fixing markets?

[The 40 percent plunge in world grain prices is documented in "Rethinking US Agricultural Policy: Changing Course to Secure Farmer Livelihoods Worldwide." It can be found on the website of the Agricultural Policy Analysis Center, University of Tennessee: http://apacweb.ag.utk.edu/blueprint.html.]

Elbert van Donkersgoed is the Strategic Policy Advisor of the Christian Farmers Federation of Ontario, Canada. Corner Post can be heard weekly on CFCO Radio, Chatham and CKNX Radio, Wingham, Ontario. Corner Post has an email subscriber list of more than 3,000 and appears regularly on @g Worldwide Correspondents at www.agriculture.com/worldwide/correspondents/index.html. Corner Post is archived at www.christianfarmers.org/commentary/Corner-Post.htm. To be added to the electronic distribution list of Corner Post send email to evd@christianfarmers.org with SUBSCRIBE as the message.