Hi folks,
I won't be sending out a column next week as we are going on a short
vacation. Hope summer is treating all of you well. Regards, Paul
Column # 680 Deny, Deny, Deny 28/07/08
In Freudian psychology, denial is an ego defense mechanism. Defense
mechanisms are used by our subconscious minds to help us deal with
realities we find too difficult to face. They aren't a sign of mental
illness; rather, everyone uses them to some extent. They only become a
problem when their use leads a person to do things that are harmful in
the end. Freud had a whole list of defense mechanisms, ranging from
repression to projection to denial. The key thing to remember about
defense mechanisms is that they operate in the subconscious. We don't
realize we are indulging in them. So, denial is not really a form of
lying to ourselves. We actually believe what we are saying.
Now Freud is kind of old hat these days. Many psychologists today
figure he was too influenced by the repressed upper-middle class women
he saw in his therapy sessions, so they dismiss most of his theories
as unscientific. In the case of denial, however, current human
behaviour is making a pretty good case for Freud's idea.
Now, how does all this psychological mumbo-jumbo relate to
agriculture? Agriculture in developed countries, and increasingly in
all countries, is rooted in the consumption of fossil fuels. Fossil
fuels are the basis of planting, weeding and harvesting operations.
They produce our fertilizers and pesticides and transport our crops to
processors and markets. And they are running out.
Yes, you can trot out all the figures you want about oil sands, shale
oil, coalbed methane and the like. But a friend recently put it all in
perspective for me when he gave me the following figures: Currently
the world uses 87 million barrels of oil per day. This is increasing
rapidly and will reach 116 million barrels by 2030. At that time, we
will be using a trillion barrels every 23 years. In all of history up
until now, we've used a trillion barrels. By 2030, we'll be using this
much every 23 years. It doesn't take a rocket scientist to figure out
that our bingeing on fossil fuels will come to an end a lot sooner
than we think.
Whenever this argument is made, the usual response by those in the
throes of Freudian denial is to point to the reserves of oil sands in
Alberta and parts of Saskatchewan. Total reserves in the Athabasca
formation are estimated at around two trillion barrels, but only about
170 billion are recoverable with current techology. Even if the total
amount were recoverable, which it won't be, and notwithstanding the
massive amount of natural gas or some other form of energy required to
extract the oil from the oil sands, it is plain that we will indeed
run out of oil.
Of course, before that happens, the price will skyrocket and $1.40 a
litre diesel fuel will be a distant cherished memory.
The figures I gave you came from the International Energy Agency. The
IEA grew out of the Organization for Economic Co-operation and
Development (OECD) and is controlled by 27 developed countries
including Canada, the U.S., Japan and the U.K. The IEA's figures are
accepted by and available to these countries. So why do most of them
still act as if the petroleum age will go on forever?
The end of low cost oil will mean changes to our world as dramatic as
those brought on by the advent of low cost oil. We will continue to
need large amounts of energy, but we will have to get them somewhere
else. Some folks point to nuclear power as a solution to some of our
impending shortages. But, guess what! There are only 60 years of known
uranium reserves for the reactors currently operating in the world.
The simple fact, almost completely neglected by politicians and the
public in general, is that we need to cut energy consumption,
dramatically and rapidly. Doing so will stretch out existing petroleum
reserves and allow us more time to change the way we do just about
everything., including producing food.
And here is where denial really comes into its own. Reducing energy
consumption will mean fewer and smaller vehicles, less miles driven,
fewer airplane trips, fewer exotic vacations, fewer leaf blowers, less
food imported by air from Taiwan and Chile, smaller houses, and no
more electric toothbrushes. It will mean a whole lot more than that as
well. But these are precisely the things we don't seem prepared to
give up. In fact, we, 1.3 billion Chinese, and 1.1 billion Indians
seem to think these things are measures of the good life. Believing
this, we find all kinds of ways to tell ourselves that the impending
end of oil won't happen, or that there will be a technological
solution that will allow the orgy of energy use to continue.
I said earlier that the failure to acknowledge and act on these
realities is a form of denial by our politicians and ourselves. In
fact, that statement is denial in itself. The truth is that
politicians, at least those in real positions of power, know all this.
What they are about is protecting the interests of those reaping
massive profits from energy production in the current system.
Our denial, as citizens, is real though. In Freud's world, denial was
only pathological if it caused you to act in self-destructive ways.
Seems to me we passed that point some time ago.
(c) Paul Beingessner
Tuesday, July 29, 2008
Tuesday, July 22, 2008
Bureaucrats and Politicians Watch Rail Lines Vanish
Column # 679
21/0708
The spring of 2008 brought good news to farmers in northeast
Saskatchewan in the form of a new short line railway, Torch River Rail.
While farmers in that part of the prairies were rejoicing at the
victory, following a long struggle, farmers in southern Manitoba were
gnashing their teeth as a last ditch effort to set up a short line on
portions of CP's La Riviere and Napinka subdivisions failed.
Saskatchewan's Torch River Rail, a farmer-owned short line, became the
seventh such railway in the province, which also is home to OmniTrax's
Carlton Trail Railway. Saskatchewan is unique among the prairie
provinces in that the seven locally owned short lines are found on grain
dependent branch lines which move little traffic other than grain and
are home mostly to producer car loading facilities and small elevators.
Nor is the province maxed out in this type of railway. To my knowledge,
there are at least four more farmer-based groups that are negotiating
with either CN or CP to set up new short lines.
In contrast, Manitoba and Alberta have no short lines owned by farmers
or community-based groups. Both have seen huge amounts of branch line
abandonment. In Alberta, few groups have even attempted to set up short
lines, though Alberta was home to the original short line, Central
Western Railway. The exception to this is a group of farmers on the
Alliance subdivision in Alberta, who have been jousting with CN, which
announced its intention to abandon the line several years ago.
The failure of the Boundary Trail Railway Company in southern Manitoba
illustrates why Manitoba and Alberta have been so unable to save branch
lines while Saskatchewan has a track record that is nothing short of
remarkable. Most of the blame for Manitoba and Alberta's failures can be
laid at the feet of their provincial governments. Most of Saskatchewan's
success stems from the same source.
The government of Saskatchewan was intimately involved in the quest to
save branch lines long before the first short line in the province began
operation in late 1989. Southern Rails Co-operative was the culmination
of a vision long held among civil servants in the Department of
Highways. While Southern Rails was the first farmer-owned short line, it
would be a decade before resistance from the major railways broke down
enough to see a second. During that time, however, Saskatchewan saw
limited branch line abandonment as the fight was on over each and every
line. The province had an active unit within the Department of Highways
and Transportation that worked pro-actively with farm groups around the
province each time the railways threatened abandonment. Besides offering
valuable technical support and advice, the province but up some cash,
offering interest-free loans to would-be shortlines to purchase track
and giving grants for feasibility studies.
The situation could not have been more different for farmers in Manitoba
and Alberta. The transportation departments there offered only
indifference or active hostility to the idea of short lines on grain
dependent branch lines. I remember a call I received about 15 years ago
from the major of High River, Alberta when the branch line through that
town was slated for abandonment. After explaining his options under the
law, I suggested he contact his provincial transportation department and
demand some support and assistance in exploring those options. His
gloomy response was that he had done that. Bureaucrats in that
department told him that, rather than supporting his efforts, they were
in agreement with the railways that branch lines should be abandoned.
Ironically, the trouble in Alberta and Manitoba can be laid partly at
the feet of the entrepreneurial spirit. Tom Payne, Alberta's iconic
railroader, was the impetus behind Central Western Railway. He firmly
believed that short lines should be profitable entities that survived by
acting as service providers to the big railways. In Manitoba, Brandon's
Cando Contracting built a small railway empire by becoming dominant in
the railway salvage business. Only later did Cando get into short lines.
The Peters' family enterprise was careful not to get involved in grain
dependent branch lines, preferring instead lines with a diversity of
traffic.
The government of Manitoba seemed more than happy to have Cando
scrutinizing its branch lines for viability. If Cando wasn't interested,
the government wasn't either. Manitoba's other abortive short line
venture came in the form of the Southern Manitoba Railway. These CN
branch lines were sold to an American company with a dubious reputation
as a railroad salvager. That short line lasted about eight years before
ceasing operation altogether.
Saskatchewan's farmer-owned short lines have developed with a different
mentality. The goal has seldom been to create highly profitable
railways. Rather, the short lines have been seen as a means to an end,
that end being the retention of viable rail service to maintain grain
delivery and community development options. Southern Rails Co-op has
logged eighteen years with this approach.
Such an attitude might have served Alberta and Manitoba well. Instead,
indifferent bureaucrats and myopic politicians have thinned their rail
networks to the point of no return. While it is largely too late now,
farmers in these provinces should have been kicking some government
derriere years ago.
And Saskatchewan? Recently the government came up with a half-million
dollars in grant money for short line rehab projects.
(c) Paul Beingessner
beingessner@sasktel.net
21/0708
The spring of 2008 brought good news to farmers in northeast
Saskatchewan in the form of a new short line railway, Torch River Rail.
While farmers in that part of the prairies were rejoicing at the
victory, following a long struggle, farmers in southern Manitoba were
gnashing their teeth as a last ditch effort to set up a short line on
portions of CP's La Riviere and Napinka subdivisions failed.
Saskatchewan's Torch River Rail, a farmer-owned short line, became the
seventh such railway in the province, which also is home to OmniTrax's
Carlton Trail Railway. Saskatchewan is unique among the prairie
provinces in that the seven locally owned short lines are found on grain
dependent branch lines which move little traffic other than grain and
are home mostly to producer car loading facilities and small elevators.
Nor is the province maxed out in this type of railway. To my knowledge,
there are at least four more farmer-based groups that are negotiating
with either CN or CP to set up new short lines.
In contrast, Manitoba and Alberta have no short lines owned by farmers
or community-based groups. Both have seen huge amounts of branch line
abandonment. In Alberta, few groups have even attempted to set up short
lines, though Alberta was home to the original short line, Central
Western Railway. The exception to this is a group of farmers on the
Alliance subdivision in Alberta, who have been jousting with CN, which
announced its intention to abandon the line several years ago.
The failure of the Boundary Trail Railway Company in southern Manitoba
illustrates why Manitoba and Alberta have been so unable to save branch
lines while Saskatchewan has a track record that is nothing short of
remarkable. Most of the blame for Manitoba and Alberta's failures can be
laid at the feet of their provincial governments. Most of Saskatchewan's
success stems from the same source.
The government of Saskatchewan was intimately involved in the quest to
save branch lines long before the first short line in the province began
operation in late 1989. Southern Rails Co-operative was the culmination
of a vision long held among civil servants in the Department of
Highways. While Southern Rails was the first farmer-owned short line, it
would be a decade before resistance from the major railways broke down
enough to see a second. During that time, however, Saskatchewan saw
limited branch line abandonment as the fight was on over each and every
line. The province had an active unit within the Department of Highways
and Transportation that worked pro-actively with farm groups around the
province each time the railways threatened abandonment. Besides offering
valuable technical support and advice, the province but up some cash,
offering interest-free loans to would-be shortlines to purchase track
and giving grants for feasibility studies.
The situation could not have been more different for farmers in Manitoba
and Alberta. The transportation departments there offered only
indifference or active hostility to the idea of short lines on grain
dependent branch lines. I remember a call I received about 15 years ago
from the major of High River, Alberta when the branch line through that
town was slated for abandonment. After explaining his options under the
law, I suggested he contact his provincial transportation department and
demand some support and assistance in exploring those options. His
gloomy response was that he had done that. Bureaucrats in that
department told him that, rather than supporting his efforts, they were
in agreement with the railways that branch lines should be abandoned.
Ironically, the trouble in Alberta and Manitoba can be laid partly at
the feet of the entrepreneurial spirit. Tom Payne, Alberta's iconic
railroader, was the impetus behind Central Western Railway. He firmly
believed that short lines should be profitable entities that survived by
acting as service providers to the big railways. In Manitoba, Brandon's
Cando Contracting built a small railway empire by becoming dominant in
the railway salvage business. Only later did Cando get into short lines.
The Peters' family enterprise was careful not to get involved in grain
dependent branch lines, preferring instead lines with a diversity of
traffic.
The government of Manitoba seemed more than happy to have Cando
scrutinizing its branch lines for viability. If Cando wasn't interested,
the government wasn't either. Manitoba's other abortive short line
venture came in the form of the Southern Manitoba Railway. These CN
branch lines were sold to an American company with a dubious reputation
as a railroad salvager. That short line lasted about eight years before
ceasing operation altogether.
Saskatchewan's farmer-owned short lines have developed with a different
mentality. The goal has seldom been to create highly profitable
railways. Rather, the short lines have been seen as a means to an end,
that end being the retention of viable rail service to maintain grain
delivery and community development options. Southern Rails Co-op has
logged eighteen years with this approach.
Such an attitude might have served Alberta and Manitoba well. Instead,
indifferent bureaucrats and myopic politicians have thinned their rail
networks to the point of no return. While it is largely too late now,
farmers in these provinces should have been kicking some government
derriere years ago.
And Saskatchewan? Recently the government came up with a half-million
dollars in grant money for short line rehab projects.
(c) Paul Beingessner
beingessner@sasktel.net
Monday, July 14, 2008
High Food Prices Not the Problem
Column # 678 14/07/08
A recent Reuters news story on the high cost of food was itself food for
thought. The story concerned the U.S. Commodity Futures Trading
Commission (CFTC), an "independent" government agency with a mandate to
regulate commodity futures and option markets in the United States. The
CFTC announced it had formed a taskforce with other government agencies
to study recent activities in commodity markets. The concern that
prompted this was the meteoric rise in commodity prices over the last
year or so. Some suggest this has been fuelled by speculators looking
for a quick buck, rather than by any fundamentals of supply and demand.
The CFTC didn't single out food prices as the major area of concern,
citing instead rising oil prices and "other commodities". The Reuters
story, however, complained that high prices for farm commodities, along
with oil, have "roiled U.S. and world markets in recent months". It went
on to quote the U.S. Department of Agriculture, which it said is
"forecasting sharp increases this year in U.S. food prices, expected to
rise by five per cent in the largest increase since 1990".
The Reuters reporter, it seems, saw the focus of this story as the high
price of food. Indeed, this has become a major pre-occupation for
reporters and for lobby groups of all types. Food prices are too high if
you judge by the cacophony of voices shouting this mantra. Yet the
number Reuters used is startling for how low it is. Given the beating
farmers have taken since 1990, a five percent increase in their incomes
would be paltry. Yet a five percent increase in food prices can be
trumpeted as a major crisis. Note that Reuters did not mention the
percent increase in the price of gasoline or heating fuels or (here in
western Canada) house prices.
A story in a similar vein surfaced a couple weeks ago. It came from the
United Nations Food and Agriculture Organization. It seems the FAO had
commissioned but not released a study on the increase in grain prices
caused by the demand for grain for ethanol and bio-fuels. Contrary to
numbers put forth by the American government, which claims grain for
bio-fuels only contributed to three percent of the price increase, the
FAO study said it was actually 75 percent. This is an important issue,
but again, the focus of reporting on it often revolves around concern
about food prices.
Stories like this are commonplace today. The Canadian Chamber of
Commerce recently wrote a letter to the Prime Minister asking that
Canada give up its support for supply management in the interest of
getting a new trade deal at the WTO. The Chamber justified its stance by
claiming supply management cost the average Canadian family of four $300
more per year than it otherwise would have had to spend on dairy and
poultry products.
The common theme in these various stories is that food price increases
are universally a bad thing. This simply isn't so. Yes, they are bad for
those folks in poor countries existing on one or two dollars a day.
Since most of this meager amount is spent on food, any increase is
disastrous. For a relatively wealthy European, Asian or North American,
a few percentage points increase in the cost of food is a minor
inconvenience at most. Since a third to a half of all North American
meals are now eaten in restaurants, one less trip per week to the golden
arches would save enough to offset the "sharp" five percent increase the
USDA is fretting about.
The increasing cost of food is a good thing if the extra money accrues
to the world's farmers. That is a controversial item in itself, and not
really the subject for this column, but farmers are indeed achieving
somewhat better returns due to higher grain prices. This will spur extra
production, which is needed, since world grain stocks have fallen
precipitously in recent years. So that is a good thing on many fronts.
It doesn't change, however, the negative consequences for the world's
poor. But, and this is the crux of this long diatribe, we are defining
the problem incorrectly. The problem is not the high cost of food for
the poor, since many of the poor are small farmers, and might in fact
benefit when they go to sell any surplus crops. The problem is the low
levels of income and wrong-headed government policies that fail to
protect the vulnerable from food price increases. Much of this bad
government policy is entrenched in trade deals that attempt to force
open the markets of developing countries, under the guise of allowing
their farmers to compete on world markets. What they do is destroy the
ability of a country to enact policies to achieve food sovereignty.
All this underscores the fact that food policies have failed the two
classes that are most affected by the cost of food - farmers and the
poor. In a rational world, we would separate food out from other trade
and government policies, and examine it with a different lens. The CFTC
might be right to suspect that speculators are inappropriately affecting
the price of food, but it will come to the wrong conclusions in seeking
a solution if it thinks the problem is the high cost of food. The
problem is our failure to see the right to adequate food as the most
basic of human rights.
(c) Paul Beingessner
beingessner@sasktel.net
A recent Reuters news story on the high cost of food was itself food for
thought. The story concerned the U.S. Commodity Futures Trading
Commission (CFTC), an "independent" government agency with a mandate to
regulate commodity futures and option markets in the United States. The
CFTC announced it had formed a taskforce with other government agencies
to study recent activities in commodity markets. The concern that
prompted this was the meteoric rise in commodity prices over the last
year or so. Some suggest this has been fuelled by speculators looking
for a quick buck, rather than by any fundamentals of supply and demand.
The CFTC didn't single out food prices as the major area of concern,
citing instead rising oil prices and "other commodities". The Reuters
story, however, complained that high prices for farm commodities, along
with oil, have "roiled U.S. and world markets in recent months". It went
on to quote the U.S. Department of Agriculture, which it said is
"forecasting sharp increases this year in U.S. food prices, expected to
rise by five per cent in the largest increase since 1990".
The Reuters reporter, it seems, saw the focus of this story as the high
price of food. Indeed, this has become a major pre-occupation for
reporters and for lobby groups of all types. Food prices are too high if
you judge by the cacophony of voices shouting this mantra. Yet the
number Reuters used is startling for how low it is. Given the beating
farmers have taken since 1990, a five percent increase in their incomes
would be paltry. Yet a five percent increase in food prices can be
trumpeted as a major crisis. Note that Reuters did not mention the
percent increase in the price of gasoline or heating fuels or (here in
western Canada) house prices.
A story in a similar vein surfaced a couple weeks ago. It came from the
United Nations Food and Agriculture Organization. It seems the FAO had
commissioned but not released a study on the increase in grain prices
caused by the demand for grain for ethanol and bio-fuels. Contrary to
numbers put forth by the American government, which claims grain for
bio-fuels only contributed to three percent of the price increase, the
FAO study said it was actually 75 percent. This is an important issue,
but again, the focus of reporting on it often revolves around concern
about food prices.
Stories like this are commonplace today. The Canadian Chamber of
Commerce recently wrote a letter to the Prime Minister asking that
Canada give up its support for supply management in the interest of
getting a new trade deal at the WTO. The Chamber justified its stance by
claiming supply management cost the average Canadian family of four $300
more per year than it otherwise would have had to spend on dairy and
poultry products.
The common theme in these various stories is that food price increases
are universally a bad thing. This simply isn't so. Yes, they are bad for
those folks in poor countries existing on one or two dollars a day.
Since most of this meager amount is spent on food, any increase is
disastrous. For a relatively wealthy European, Asian or North American,
a few percentage points increase in the cost of food is a minor
inconvenience at most. Since a third to a half of all North American
meals are now eaten in restaurants, one less trip per week to the golden
arches would save enough to offset the "sharp" five percent increase the
USDA is fretting about.
The increasing cost of food is a good thing if the extra money accrues
to the world's farmers. That is a controversial item in itself, and not
really the subject for this column, but farmers are indeed achieving
somewhat better returns due to higher grain prices. This will spur extra
production, which is needed, since world grain stocks have fallen
precipitously in recent years. So that is a good thing on many fronts.
It doesn't change, however, the negative consequences for the world's
poor. But, and this is the crux of this long diatribe, we are defining
the problem incorrectly. The problem is not the high cost of food for
the poor, since many of the poor are small farmers, and might in fact
benefit when they go to sell any surplus crops. The problem is the low
levels of income and wrong-headed government policies that fail to
protect the vulnerable from food price increases. Much of this bad
government policy is entrenched in trade deals that attempt to force
open the markets of developing countries, under the guise of allowing
their farmers to compete on world markets. What they do is destroy the
ability of a country to enact policies to achieve food sovereignty.
All this underscores the fact that food policies have failed the two
classes that are most affected by the cost of food - farmers and the
poor. In a rational world, we would separate food out from other trade
and government policies, and examine it with a different lens. The CFTC
might be right to suspect that speculators are inappropriately affecting
the price of food, but it will come to the wrong conclusions in seeking
a solution if it thinks the problem is the high cost of food. The
problem is our failure to see the right to adequate food as the most
basic of human rights.
(c) Paul Beingessner
beingessner@sasktel.net
Monday, July 07, 2008
Proposed Sale Further Increases Packer Concentration
Column # 677 07/07/08
Nilsson Bros. recent offer to buy the Lakeside Packers beef slaughter
plant in Brooks has pleased some folks in the cattle industry in
Alberta. Feedlot operators seem the happiest. They were worried that
Tyson Foods, the mega-corporation that owns Lakeside, would close the
plant in response to what Tyson has described as an excess of slaughter
capacity in North America. Had Lakeside closed, only one major packer
would have been left in western Canada - Cargill.
While there appears to be joy over the offer-to-purchase, it must be the
ultimate in making the best of a bad situation. Who but a farmer could
find happiness in a reduction in the number of buyers for his products?
Answer: feedlots owners, apparently.
Nilsson Bros., the purchaser-in-waiting is no stranger to cattle
producers on the prairies. In my part of southern Saskatchewan, they
made their presence felt a few years back when they purchased all of the
auction marts around here - Regina, Moose Jaw, Weyburn and Assiniboia.
Their first act on cornering the market on auction barns was to
introduce a new fee for feeding cattle held overnight for pre-sort
sales. Next was a reduction in the number of days when cattle were sold.
Most farmers around here weren't too happy about Nilsson Bros. monopoly
since it raised their costs and reduced their options.
Nilsson Bros. is also involved in cattle feeding and cow-calf
production. The Lakeside sale includes a 75,000 head feedlot owned by
Lakeside. Under the name XL Foods, Nilsson Bros. currently operates a
smaller slaughter plant in Moose Jaw and in several other Canadian and
American locations. It is now poised to become a major player in Canada.
While cattle feeders here are praising the proposed sale, cattle feeders
in the U.S. have long been concerned about the very situation evolving
here - packer concentration and captive supply, where packers own cattle
on feed. The trouble with this scenario is that owning cattle on feed
gives packers the ability to manipulate the market. When prices are
high, they draw on their own cattle for slaughter. This reduces demand
for cattle on auction and drives prices down. When prices are low, the
packer buys cattle on the market.
Some will argue that the livestock market is a North American market,
and the farmer will see his calves move all over the continent, just as
the feedlot owner sends his fat cattle to slaughter plants across North
America, wherever the price is best. There is a degree of truth in that,
at least when BSE or some trade irritant isn't closing the border. But
even in the North American market, there are only a handful of major
players. In the event of a border closure, such as may occur in a de
facto way with implementation of Country of Origin Labelling in the
U.S., the Canadian packers will be reduced in number and will be more in
the driver's seat than ever.
The difficult truth is that the packing industry catches farmers between
a rock and a hard place. Extremely large packing plants offer economies
of scale and economic power that make it difficult, if not impossible
for small plants to compete. These same economies can make our beef
competitive in world markets. Extremely large plants mean, however, that
there are only a few of them. This concentration usually means packers
don't need to pass the benefits of monopoly and economies of scale back
to feeders and hence to farmers.
It seems then, that we are stuck. We have too many cattle for domestic
demand and too few buyers to ensure competitive bids. But we are not
going back to the days of many small packers any time soon. Indeed, if
Tyson is right, we may see fewer packers still, as cattle herds shrink
to fit the new economic realities.
The Tyson deal will still have to clear the Competitions Bureau but
don't expect this toothless tiger to stand in the way. It would be best
for all concerned if the Lakeside plant went to a third party. In the
highly concentrated beef packing industry, that is not likely to happen.
The game is still very much afoot for cattle producers. With declining
cattle numbers, continuing high grain prices and COOL rearing its head
this fall, they have much to be concerned about.
(c) Paul Beingessner
Nilsson Bros. recent offer to buy the Lakeside Packers beef slaughter
plant in Brooks has pleased some folks in the cattle industry in
Alberta. Feedlot operators seem the happiest. They were worried that
Tyson Foods, the mega-corporation that owns Lakeside, would close the
plant in response to what Tyson has described as an excess of slaughter
capacity in North America. Had Lakeside closed, only one major packer
would have been left in western Canada - Cargill.
While there appears to be joy over the offer-to-purchase, it must be the
ultimate in making the best of a bad situation. Who but a farmer could
find happiness in a reduction in the number of buyers for his products?
Answer: feedlots owners, apparently.
Nilsson Bros., the purchaser-in-waiting is no stranger to cattle
producers on the prairies. In my part of southern Saskatchewan, they
made their presence felt a few years back when they purchased all of the
auction marts around here - Regina, Moose Jaw, Weyburn and Assiniboia.
Their first act on cornering the market on auction barns was to
introduce a new fee for feeding cattle held overnight for pre-sort
sales. Next was a reduction in the number of days when cattle were sold.
Most farmers around here weren't too happy about Nilsson Bros. monopoly
since it raised their costs and reduced their options.
Nilsson Bros. is also involved in cattle feeding and cow-calf
production. The Lakeside sale includes a 75,000 head feedlot owned by
Lakeside. Under the name XL Foods, Nilsson Bros. currently operates a
smaller slaughter plant in Moose Jaw and in several other Canadian and
American locations. It is now poised to become a major player in Canada.
While cattle feeders here are praising the proposed sale, cattle feeders
in the U.S. have long been concerned about the very situation evolving
here - packer concentration and captive supply, where packers own cattle
on feed. The trouble with this scenario is that owning cattle on feed
gives packers the ability to manipulate the market. When prices are
high, they draw on their own cattle for slaughter. This reduces demand
for cattle on auction and drives prices down. When prices are low, the
packer buys cattle on the market.
Some will argue that the livestock market is a North American market,
and the farmer will see his calves move all over the continent, just as
the feedlot owner sends his fat cattle to slaughter plants across North
America, wherever the price is best. There is a degree of truth in that,
at least when BSE or some trade irritant isn't closing the border. But
even in the North American market, there are only a handful of major
players. In the event of a border closure, such as may occur in a de
facto way with implementation of Country of Origin Labelling in the
U.S., the Canadian packers will be reduced in number and will be more in
the driver's seat than ever.
The difficult truth is that the packing industry catches farmers between
a rock and a hard place. Extremely large packing plants offer economies
of scale and economic power that make it difficult, if not impossible
for small plants to compete. These same economies can make our beef
competitive in world markets. Extremely large plants mean, however, that
there are only a few of them. This concentration usually means packers
don't need to pass the benefits of monopoly and economies of scale back
to feeders and hence to farmers.
It seems then, that we are stuck. We have too many cattle for domestic
demand and too few buyers to ensure competitive bids. But we are not
going back to the days of many small packers any time soon. Indeed, if
Tyson is right, we may see fewer packers still, as cattle herds shrink
to fit the new economic realities.
The Tyson deal will still have to clear the Competitions Bureau but
don't expect this toothless tiger to stand in the way. It would be best
for all concerned if the Lakeside plant went to a third party. In the
highly concentrated beef packing industry, that is not likely to happen.
The game is still very much afoot for cattle producers. With declining
cattle numbers, continuing high grain prices and COOL rearing its head
this fall, they have much to be concerned about.
(c) Paul Beingessner
Tuesday, July 01, 2008
Global Forces Will Challenge Agriculture
Column # 676 Global Forces Will Challenge Agriculture 30/06/08
There are a couple things that will dramatically affect farming in the
future - forever. Well, at least as far as anyone can see. One of those
is the shrinking supply of cheap fossil fuels. The other is climate
change brought on by world-wide use of those dwindling fossil fuels.
Increasing fuel costs will impact agriculture in ways we have only begun
to imagine. They will be especially large in a country like Canada, a
country with small population and a large export agriculture industry.
Our small population means we have to export a lot of our production if
we are going to stick with large-scale export-oriented agriculture. The
trouble is, most of our customers are a long way off, and the increasing
cost of ocean freight, driven by fuel costs, is already impacting our
competitiveness. Countries like the Ukraine and Kazakhstan will have a
big advantage over us in Europe, while Australia is much closer to Asian
markets than we are.
Even the population centres in eastern Canada are far enough away that
they might look to the U.S. before they consider western Canada as a
supplier.
Rising fuel costs also mean an increase in just about every farm input
you could imagine. Fertilizer and diesel fuel are the most obvious and
frightening. Already sky-high fertilizer prices are now predicted to
skip their end-of-season drop and continue climbing throughout the fall,
winter and next spring. Note that farmers in many other parts of the
world pay much lower prices for nitrogen fertilizer. Don't expect us to
benefit from this, though, because the cost of importing fertilizer will
continue to increase as a result of, you guessed it, rising ocean
freight.
It is also tough to imagine industrial agriculture cutting its
consumption of diesel fuel much. Farmers have largely adopted minimum
tillage, so there are not a lot of gains to be made on that front. About
the only significant savings that could be made here would come if
farmers quit buying those tanks disguised as farm trucks and went to
something smaller. Of course, that would imply the automakers would have
to build something smaller and more fuel-efficient.
Global warming is the other horseman of the Twenty-first Century
Apocalypse. Yes, I know there are still some who say global warming is
not the result of human activity. I am also aware that more than 500
years after Columbus sailed the ocean blue, there is still a flat earth
society. So don't expect the Fraser Institute to go away anytime soon.
Whether you believe global warming is human-caused or not, it is
happening. Polar ice is melting, glaciers are receding, increasing
temperatures on the Canadian prairies are a reality, and rainfall
patterns are becoming erratic all over the world. Unlike the myopic
folks who ask what's not to like about a longer summer, I don't like it
one bit. Anyone who makes a living off growing plants should take a look
at British Columbia's forests if they think warmer weather will be a
boon to the ecosystem. BC has been denuded because the Mountain Pine
Beetle is no longer kept in check by cold winters.
A warmer prairie climate will bring with it a host of new insect
plagues, along with a migration of such lovely diseases as elephantiasis
and dengue fever, which normally could not survive our climate.
Farmers may have a longer growing season on average, but how will that
help if there is no extra moisture to take advantage of it? Rather,
production will be an increasing challenge with hotter, longer summers.
New crop varieties will be needed to cope with these changes. All types
of fall seeded crops might be one answer to the heat problem, but this
will take a lot of research. At the moment, Canada shows no sign that it
understands the vast increase in research that will be necessary to
sustain agriculture and feed the urban masses in their condos.
The point about research is most disturbing. All governments in Canada
appear oblivious to the challenges agricultural production will face. If
you thing that's too strong a statement, take a look at the budgets of
ag departments the country over. It is commonly understood that we are
close to, or have already passed the peak of oil production. Global
warming, if polar ice is any indication, is not going to occur over
centuries. It will be decades and years. Increased scientific research
will be absolutely necessary if we are to deal with the inevitable
outcomes of these earth-shaking events. Unfortunately, there is little
evidence the current federal government even believes these are serious
issues. Better, I guess, to piddle away the next couple years scheming
about the Canadian Wheat Board.
(c) Paul Beingessner
There are a couple things that will dramatically affect farming in the
future - forever. Well, at least as far as anyone can see. One of those
is the shrinking supply of cheap fossil fuels. The other is climate
change brought on by world-wide use of those dwindling fossil fuels.
Increasing fuel costs will impact agriculture in ways we have only begun
to imagine. They will be especially large in a country like Canada, a
country with small population and a large export agriculture industry.
Our small population means we have to export a lot of our production if
we are going to stick with large-scale export-oriented agriculture. The
trouble is, most of our customers are a long way off, and the increasing
cost of ocean freight, driven by fuel costs, is already impacting our
competitiveness. Countries like the Ukraine and Kazakhstan will have a
big advantage over us in Europe, while Australia is much closer to Asian
markets than we are.
Even the population centres in eastern Canada are far enough away that
they might look to the U.S. before they consider western Canada as a
supplier.
Rising fuel costs also mean an increase in just about every farm input
you could imagine. Fertilizer and diesel fuel are the most obvious and
frightening. Already sky-high fertilizer prices are now predicted to
skip their end-of-season drop and continue climbing throughout the fall,
winter and next spring. Note that farmers in many other parts of the
world pay much lower prices for nitrogen fertilizer. Don't expect us to
benefit from this, though, because the cost of importing fertilizer will
continue to increase as a result of, you guessed it, rising ocean
freight.
It is also tough to imagine industrial agriculture cutting its
consumption of diesel fuel much. Farmers have largely adopted minimum
tillage, so there are not a lot of gains to be made on that front. About
the only significant savings that could be made here would come if
farmers quit buying those tanks disguised as farm trucks and went to
something smaller. Of course, that would imply the automakers would have
to build something smaller and more fuel-efficient.
Global warming is the other horseman of the Twenty-first Century
Apocalypse. Yes, I know there are still some who say global warming is
not the result of human activity. I am also aware that more than 500
years after Columbus sailed the ocean blue, there is still a flat earth
society. So don't expect the Fraser Institute to go away anytime soon.
Whether you believe global warming is human-caused or not, it is
happening. Polar ice is melting, glaciers are receding, increasing
temperatures on the Canadian prairies are a reality, and rainfall
patterns are becoming erratic all over the world. Unlike the myopic
folks who ask what's not to like about a longer summer, I don't like it
one bit. Anyone who makes a living off growing plants should take a look
at British Columbia's forests if they think warmer weather will be a
boon to the ecosystem. BC has been denuded because the Mountain Pine
Beetle is no longer kept in check by cold winters.
A warmer prairie climate will bring with it a host of new insect
plagues, along with a migration of such lovely diseases as elephantiasis
and dengue fever, which normally could not survive our climate.
Farmers may have a longer growing season on average, but how will that
help if there is no extra moisture to take advantage of it? Rather,
production will be an increasing challenge with hotter, longer summers.
New crop varieties will be needed to cope with these changes. All types
of fall seeded crops might be one answer to the heat problem, but this
will take a lot of research. At the moment, Canada shows no sign that it
understands the vast increase in research that will be necessary to
sustain agriculture and feed the urban masses in their condos.
The point about research is most disturbing. All governments in Canada
appear oblivious to the challenges agricultural production will face. If
you thing that's too strong a statement, take a look at the budgets of
ag departments the country over. It is commonly understood that we are
close to, or have already passed the peak of oil production. Global
warming, if polar ice is any indication, is not going to occur over
centuries. It will be decades and years. Increased scientific research
will be absolutely necessary if we are to deal with the inevitable
outcomes of these earth-shaking events. Unfortunately, there is little
evidence the current federal government even believes these are serious
issues. Better, I guess, to piddle away the next couple years scheming
about the Canadian Wheat Board.
(c) Paul Beingessner
Wednesday, June 25, 2008
Paul dumped again...sigh
Tues June 24 2008
I received the following email yesterday, and thought it might be on
interest to you all. You might remember the column it refers to as the
one in which I compared parts prices in Sk and North Dakota. I have
removed the editor's name from the email. Suffice it to say it came from
very close to home. The implement dealer I think is behind this has been
a great fan of the Western Cdn Wheat Growers so it was likely a good
opportunity to knock me off entirely. So much for the freedom of the
press and free enterprise to boot. I don't really blame the editor. They
have 2 small papers and advertising from the dealership is constant and
likely quite important. However, it does give a window into how the
world runs. Notice that they didn't claim what I said was wrong....
Cheers,
Paul
Paul
I am sorry to inform you that we are unable to run your column any
longer.
As you probably know the Column that you wrote about the implement
dealers
has caused quite an uproar and they are no longer advertising in our
paper.
They said they may continue to run if we remove your column completely,
so
regrettably we have to discontinue your column.
Please send your final bill and we will get you paid up.
I received the following email yesterday, and thought it might be on
interest to you all. You might remember the column it refers to as the
one in which I compared parts prices in Sk and North Dakota. I have
removed the editor's name from the email. Suffice it to say it came from
very close to home. The implement dealer I think is behind this has been
a great fan of the Western Cdn Wheat Growers so it was likely a good
opportunity to knock me off entirely. So much for the freedom of the
press and free enterprise to boot. I don't really blame the editor. They
have 2 small papers and advertising from the dealership is constant and
likely quite important. However, it does give a window into how the
world runs. Notice that they didn't claim what I said was wrong....
Cheers,
Paul
Paul
I am sorry to inform you that we are unable to run your column any
longer.
As you probably know the Column that you wrote about the implement
dealers
has caused quite an uproar and they are no longer advertising in our
paper.
They said they may continue to run if we remove your column completely,
so
regrettably we have to discontinue your column.
Please send your final bill and we will get you paid up.
Monday, June 23, 2008
Conservative's CWB Strategy Loses in Court, Again
Column # 675 23/06/08
Chalk up another loss for Stephen Harper's government at the hands of
the Canadian Constitution. Two years ago then Agriculture Minister Chuck
Strahl slapped a gag order on the Canadian Wheat Board, prohibiting it
from doing anything to defend itself against attacks by the government
or the small anti-CWB groups that have sole access to the Minister's
ear. The CWB appealed this order to the federal court of Canada and the
ruling finally came down at the end of last week. Once again, as has
happened twice before, the Harper government was judged to have broken
the laws of the country in regard to the CWB.
Defenders of the gag order maintained it merely prevented the CWB from
spending farmers' money on propaganda. The federal court judge saw it
otherwise, saying, "It is entirely clear, therefore, that the directive
is motivated principally to silencing the Wheat Board in respect of any
promotion of a 'single desk' policy that it might do."
In fact, the gag order even prevented the Board from putting on its
website independent academic studies conducted at the University of
Saskatchewan and other such institutions. In this regard, the
government's strategy, as revealed in recent court documents seems to
have worked. Support for the CWB edged downward slightly in the recent
poll the Board conducted. As the independent pollster commented, if you
allow one side to speak and gag the other, the side able to put out its
message will gain support.
The CWB has now taken the federal government to court over four issues.
It has won three of them. The fourth was also ruled on last week. It was
the appeal of the government order requiring the CWB to pay Greg Arason
the paltry sum of $30,000 per month when the government fired Adrian
Measner and imposed Arason on the CWB as CEO.
Legally, the government could do that, since the CWB Act allows it to
appoint the CEO. However, the act also says that the directors set the
salary for the CEO. Harper's government refused to allow the CWB to do
this. The Board appealed, with the judge ruling that the case was now
moot. This means, essentially, that it is irrelevant, because Arason is
no longer the CEO, having taken his pitiful allowance and retired to
Florida.
Here again the government's strategy seems to have worked. The court
system moved so slowly that Arason did his appointed tenure, and his
damage as CEO, and got out while the getting was good, long before the
court caught up with his political masters. Had the court acted in a
timely manner, the government might not have been able to impose its
will on the directors whom farmers elected to run the CWB. The positive
aspect of the court decision is that it reaffirmed strongly that running
the CWB is the job of the directors, not the government.
Given the outcome of the three cases the courts did rule on, all in the
CWB's favor, you have to think the government has some pretty lousy
lawyers working for it if they keep advising courses of action that are
illegal. Not true, I suspect. The government's lawyers likely knew the
actions the government undertook were illegal, but the government went
ahead, knowing that it would accomplish some of its goals anyway. As I
said earlier, it did seem to improve its position in the battle for
public opinion, even if it ultimately lost the war at the courts. Same
for the firing of Measner and appointment of Arason. Among other things,
Arason fired Deanna Allen, as the anti-CWB groups had demanded, and got
his golden handshake.
It's a pretty cynical way for a government to act, but the government
appears to have gotten away with it to a great extent. While these
actions were condemned by some major farm groups, like Keystone
Agriculture Producers, the National Farmers Union and the Canadian
Federation of Agriculture, others were less vocal. APAS and SARM, the
farm groups in Saskatchewan that claim to have the broadest
constituencies, were silent on the government's illegal actions. Nor
should you expect much reaction now. SARM has effectively dropped out of
farm policy, while APAS is too busy firing its policy people to look up
from the vantage point it has between its legs. The APAS executive is
unlikely to criticize anything Conservative, no matter how undemocratic.
What's next on Harper's agenda for the CWB? Expect it to come in the
form of attempting to Gerry-mander the upcoming CWB director elections.
Harper's response to the court ruling was to maintain he would break the
CWB's single desk, no matter what, threatening to "walk over" anyone who
stands in his way. For now, however, the courts have said that even
Harper's government can't walk over the Canadian Constitution.
(c) Paul Beingessner
Chalk up another loss for Stephen Harper's government at the hands of
the Canadian Constitution. Two years ago then Agriculture Minister Chuck
Strahl slapped a gag order on the Canadian Wheat Board, prohibiting it
from doing anything to defend itself against attacks by the government
or the small anti-CWB groups that have sole access to the Minister's
ear. The CWB appealed this order to the federal court of Canada and the
ruling finally came down at the end of last week. Once again, as has
happened twice before, the Harper government was judged to have broken
the laws of the country in regard to the CWB.
Defenders of the gag order maintained it merely prevented the CWB from
spending farmers' money on propaganda. The federal court judge saw it
otherwise, saying, "It is entirely clear, therefore, that the directive
is motivated principally to silencing the Wheat Board in respect of any
promotion of a 'single desk' policy that it might do."
In fact, the gag order even prevented the Board from putting on its
website independent academic studies conducted at the University of
Saskatchewan and other such institutions. In this regard, the
government's strategy, as revealed in recent court documents seems to
have worked. Support for the CWB edged downward slightly in the recent
poll the Board conducted. As the independent pollster commented, if you
allow one side to speak and gag the other, the side able to put out its
message will gain support.
The CWB has now taken the federal government to court over four issues.
It has won three of them. The fourth was also ruled on last week. It was
the appeal of the government order requiring the CWB to pay Greg Arason
the paltry sum of $30,000 per month when the government fired Adrian
Measner and imposed Arason on the CWB as CEO.
Legally, the government could do that, since the CWB Act allows it to
appoint the CEO. However, the act also says that the directors set the
salary for the CEO. Harper's government refused to allow the CWB to do
this. The Board appealed, with the judge ruling that the case was now
moot. This means, essentially, that it is irrelevant, because Arason is
no longer the CEO, having taken his pitiful allowance and retired to
Florida.
Here again the government's strategy seems to have worked. The court
system moved so slowly that Arason did his appointed tenure, and his
damage as CEO, and got out while the getting was good, long before the
court caught up with his political masters. Had the court acted in a
timely manner, the government might not have been able to impose its
will on the directors whom farmers elected to run the CWB. The positive
aspect of the court decision is that it reaffirmed strongly that running
the CWB is the job of the directors, not the government.
Given the outcome of the three cases the courts did rule on, all in the
CWB's favor, you have to think the government has some pretty lousy
lawyers working for it if they keep advising courses of action that are
illegal. Not true, I suspect. The government's lawyers likely knew the
actions the government undertook were illegal, but the government went
ahead, knowing that it would accomplish some of its goals anyway. As I
said earlier, it did seem to improve its position in the battle for
public opinion, even if it ultimately lost the war at the courts. Same
for the firing of Measner and appointment of Arason. Among other things,
Arason fired Deanna Allen, as the anti-CWB groups had demanded, and got
his golden handshake.
It's a pretty cynical way for a government to act, but the government
appears to have gotten away with it to a great extent. While these
actions were condemned by some major farm groups, like Keystone
Agriculture Producers, the National Farmers Union and the Canadian
Federation of Agriculture, others were less vocal. APAS and SARM, the
farm groups in Saskatchewan that claim to have the broadest
constituencies, were silent on the government's illegal actions. Nor
should you expect much reaction now. SARM has effectively dropped out of
farm policy, while APAS is too busy firing its policy people to look up
from the vantage point it has between its legs. The APAS executive is
unlikely to criticize anything Conservative, no matter how undemocratic.
What's next on Harper's agenda for the CWB? Expect it to come in the
form of attempting to Gerry-mander the upcoming CWB director elections.
Harper's response to the court ruling was to maintain he would break the
CWB's single desk, no matter what, threatening to "walk over" anyone who
stands in his way. For now, however, the courts have said that even
Harper's government can't walk over the Canadian Constitution.
(c) Paul Beingessner
Monday, June 16, 2008
Farmers Pay the Piper, Someone Else Calls the Tune
Column # 674 16/06/08
Just an opinion here, but if ever there was an issue that farmers have
messed up, it has to be the issue of control over new plant varieties.
There was a time when development of new crop varieties was largely done
by universities and federal and provincial government research centres.
Varieties were distributed to grower organizations and royalties were
collected from them based on seed sales. The system worked, according to
plant breeders I've talked to.
It worked that is, for farmers and plant breeders. However, chemical
companies began to see the possibility of integrating sales of chemicals
with seed sales. If they could just breed plants that required their
chemicals, what a wonderful world it would be. Even better if they could
make money off the sale of both the chemical and the seed. The cherry on
top would be if farmers had to buy the seed every year.
Of course, all this wasn't possible within the legislative framework
that existed twenty years ago. The Plant Breeders Rights Act changed all
that. It continued to allow farmers to save seed for their own use, but
disallowed them from selling it, or giving it away to anyone. It allowed
companies, in effect, to control the release of varieties. Largely,
these were not varieties any company had developed, since most research
continued to be done with public and farmer money. Companies simply bid
for the right to "own" a variety. The trade-off was that money from the
purchasing of the rights to a variety went back to fund further
research. The problem was that farmers were now also contributing to the
fattening of the profits of seed companies.
Plant breeders rights were expanded further when governments, like
Canada, decided they would allow for the patenting of life forms. This
had been a no-no for as long as patents existed. The result, besides all
the bio-piracy that ensued, was to see companies patenting genes from
plants. This gave them the right to control not just the seed the farmer
planted, but also the seed he grew, so that companies are now able to
force farmers to follow their every dictum if they want to grow certain
varieties. An example in Canada is the requirement imposed by several
rights holders that you sell your production through certain channels,
and not to anyone else.
Farmers have always played a part in funding plant breeding. This has
been done through royalties they pay on certified seed and through
check-offs on the sale of crops. An example is the wheat and barley
check-off administered by the Canadian Wheat Board. In fact, if you get
right down to it, farmers or taxpayers pay for all plant breeding.
Private companies that do some breeding simply use money derived from
seed sales to farmers. A lot more of that money goes to other things.
One plant breeder working for a multinational company complained to me
that he would be ecstatic if his research budget was even a small
fraction of the money the company spent on advertising.
The trouble with plant breeding today is that research done by the
public sector is increasingly being turned over to the private sector to
allow it to make greater profits from farmers. The public good seems
forgotten in all this. And we are barely seeing the tip of the iceberg.
Farmers are still growing many varieties that were registered under the
old system and before the craze for proprietary ownership took over.
Immediately following the implementation of Plant Breeders Rights, few
varieties were covered. Now, virtually every new variety that comes out
is protected by PBRs. As well, chemical seed and grain companies like
Viterra and Farm Pure Seeds are increasingly tying up farmers with
contractual arrangements which don't even allow them to save their own
seed of publicly developed varieties.
And ultimately, farmers are to blame for this. They could have a great
deal of control over the registration process, since they contribute
huge amounts to plant breeding, and they have input through
organizations like the Western Grains Research Foundation, but they've
allowed a system to develop that serves the best interests of seed
companies and seed growers. And don't think it's done yet. Seed growers
have been lobbying for such measures as requiring the use of pedigreed
seed if you want to participate in crop insurance programs.
Transnationals like Monsanto want to collect royalties when the farmer
sells his crop to be sure they get every pound of flesh available.
A recent report done for the federal government might have some
implications for all this. The report on "Inter-Sectoral Partnerships
for Non-Regulatory Federal Laboratories" is suggesting a new research
center be developed. It would be called the Canadian Cereal Research and
Innovation Laboratory (CCRIL) and would bring together many of the
agencies involved in cereal research. While this may be as simple as
housing different agencies under a single roof, the implications may
reach further. The report strongly suggested that the best model for
research was one that integrated federal government research agencies
with provincial universities and the private sector under a management
scheme that was independent of the federal government.
Given the bent of the current federal government, this sounds an awful
lot like privatisation to me. However, the proponents of the CCRIL are
mostly public sector. They include the Canadian Grain Commission, the
Canadian International Grains Institute, the University of Manitoba and
the Canadian Wheat Board.
Perhaps the notion of a new research center opens an opportunity for
farmers to re-examine the registration system and who benefits from it.
It really is time the guy paying the piper started to call the tune.
(c) Paul Beingessner
Just an opinion here, but if ever there was an issue that farmers have
messed up, it has to be the issue of control over new plant varieties.
There was a time when development of new crop varieties was largely done
by universities and federal and provincial government research centres.
Varieties were distributed to grower organizations and royalties were
collected from them based on seed sales. The system worked, according to
plant breeders I've talked to.
It worked that is, for farmers and plant breeders. However, chemical
companies began to see the possibility of integrating sales of chemicals
with seed sales. If they could just breed plants that required their
chemicals, what a wonderful world it would be. Even better if they could
make money off the sale of both the chemical and the seed. The cherry on
top would be if farmers had to buy the seed every year.
Of course, all this wasn't possible within the legislative framework
that existed twenty years ago. The Plant Breeders Rights Act changed all
that. It continued to allow farmers to save seed for their own use, but
disallowed them from selling it, or giving it away to anyone. It allowed
companies, in effect, to control the release of varieties. Largely,
these were not varieties any company had developed, since most research
continued to be done with public and farmer money. Companies simply bid
for the right to "own" a variety. The trade-off was that money from the
purchasing of the rights to a variety went back to fund further
research. The problem was that farmers were now also contributing to the
fattening of the profits of seed companies.
Plant breeders rights were expanded further when governments, like
Canada, decided they would allow for the patenting of life forms. This
had been a no-no for as long as patents existed. The result, besides all
the bio-piracy that ensued, was to see companies patenting genes from
plants. This gave them the right to control not just the seed the farmer
planted, but also the seed he grew, so that companies are now able to
force farmers to follow their every dictum if they want to grow certain
varieties. An example in Canada is the requirement imposed by several
rights holders that you sell your production through certain channels,
and not to anyone else.
Farmers have always played a part in funding plant breeding. This has
been done through royalties they pay on certified seed and through
check-offs on the sale of crops. An example is the wheat and barley
check-off administered by the Canadian Wheat Board. In fact, if you get
right down to it, farmers or taxpayers pay for all plant breeding.
Private companies that do some breeding simply use money derived from
seed sales to farmers. A lot more of that money goes to other things.
One plant breeder working for a multinational company complained to me
that he would be ecstatic if his research budget was even a small
fraction of the money the company spent on advertising.
The trouble with plant breeding today is that research done by the
public sector is increasingly being turned over to the private sector to
allow it to make greater profits from farmers. The public good seems
forgotten in all this. And we are barely seeing the tip of the iceberg.
Farmers are still growing many varieties that were registered under the
old system and before the craze for proprietary ownership took over.
Immediately following the implementation of Plant Breeders Rights, few
varieties were covered. Now, virtually every new variety that comes out
is protected by PBRs. As well, chemical seed and grain companies like
Viterra and Farm Pure Seeds are increasingly tying up farmers with
contractual arrangements which don't even allow them to save their own
seed of publicly developed varieties.
And ultimately, farmers are to blame for this. They could have a great
deal of control over the registration process, since they contribute
huge amounts to plant breeding, and they have input through
organizations like the Western Grains Research Foundation, but they've
allowed a system to develop that serves the best interests of seed
companies and seed growers. And don't think it's done yet. Seed growers
have been lobbying for such measures as requiring the use of pedigreed
seed if you want to participate in crop insurance programs.
Transnationals like Monsanto want to collect royalties when the farmer
sells his crop to be sure they get every pound of flesh available.
A recent report done for the federal government might have some
implications for all this. The report on "Inter-Sectoral Partnerships
for Non-Regulatory Federal Laboratories" is suggesting a new research
center be developed. It would be called the Canadian Cereal Research and
Innovation Laboratory (CCRIL) and would bring together many of the
agencies involved in cereal research. While this may be as simple as
housing different agencies under a single roof, the implications may
reach further. The report strongly suggested that the best model for
research was one that integrated federal government research agencies
with provincial universities and the private sector under a management
scheme that was independent of the federal government.
Given the bent of the current federal government, this sounds an awful
lot like privatisation to me. However, the proponents of the CCRIL are
mostly public sector. They include the Canadian Grain Commission, the
Canadian International Grains Institute, the University of Manitoba and
the Canadian Wheat Board.
Perhaps the notion of a new research center opens an opportunity for
farmers to re-examine the registration system and who benefits from it.
It really is time the guy paying the piper started to call the tune.
(c) Paul Beingessner
Tuesday, June 10, 2008
American Farmers Get Break on Parts
Column #673 American Farmers Get Break on Parts 09/06/08
As we shared the loading of a producer car last week, my cousin shook
his head in amazement. "You know, half of this car is worth about
$20,000." It put a bit of a glow on an otherwise cool day to realize
that he was right. High protein number one durum is at a premium price
this year and dropping it into a producer car put the icing on the cake.
I grabbed the mail on the way home when the job was done. I should have
waited a while to open it, what with the glow still lingering. The fuel
bill that came in that day's mail wiped off my smile and caused a
reassessment of my good fortune. Call it sticker shock, I guess, but the
bill for diesel fuel that accompanied this year's seeding brought a
different kind of shine to my face. That last fill cost me $1.15 per
litre for diesel, while gasoline carried a price of $1.21 a litre.
It prompted me to dig out last year's spring fuel bill. Back then, durum
may have been a fraction of today's price, but so was fuel, with diesel
at 72.9 cents a litre and gasoline at $106.9. Probably few farmers are
assuming the price has peaked either. If gasoline might hit $1.50 by
July, we can expect diesel to be close behind.
The increase in fuel costs has prompted many urban motorists to blow the
dust off the bicycle and has even started some debating the merits of
the city bus. Farmers don't get much use from those two items, burdened
down as we are by fuel tanks and tools and large implements, but farmers
too are looking for ways to cut fuel consumption.
When it comes to buying parts however, they may want to consider the
benefits of burning a bit more fuel, at least if they're within driving
distance of the U.S. Equipment parts, of every type and for every brand,
appear to be much lower priced in our neighbour to the south. While I
might have been able to understand this when the Canadian dollar was at
70 cents U.S., it becomes a bit more difficult to swallow when the
dollar is at par, or higher.
How big are the differences? I did some comparisons between prices in
Saskatchewan and in Minot, North Dakota, about 240 miles south east of
my farm. The differences were strikingly consistent, from John Deere to
New Holland to CIH and Versatile. Parts at Minot were generally about 24
percent lower than the same part in Saskatchewan. This held not only
from one manufacturer to another, but from tractors to haybines to
balers, and from small items to big.
A tachometer for an ageing 3020 John Deere tractor will set you back
$283 in Saskatchewan but only cost $230 in Minot. A hydraulic pump for a
somewhat newer 4430 costs $2,171 in Regina but you could save $421 by
taking that trip to North Dakota. A remanufactured engine for a 8460
John Deere tractor finds a price of $12,900 in Minot, but somehow is
worth $15,983 when the currency and location are Canadian.
While car buyers have complained bitterly about the difference in auto
prices between here and the U.S., to some positive effect, farmers have
been rather quiet about the prices they have to pay for parts. One
fellow at a parts counter assured me that the price difference had
indeed declined recently, but that only served to make me more annoyed
as I contemplated the rip-off I have apparently been enduring for some
time. He also said that the price spread on new equipment was hurting
their business.
Not every farmer in the west is close enough to a major U.S. city to run
down for every parts order. However, the farmer who needs a big ticket
repair item, or who compiles a list of smaller ones might find a
handsome reward in taking a trip south. If enough farmers do it,
Canadian dealers will have to find ways to pressure their parent
companies to stop treating Canadian farmers like a huge cash cow. If the
rise in the Canadian dollar has driven down the price of many of the
products we sell, we should at least be able to get some small benefit
from it.
(c) Paul Beingessner
As we shared the loading of a producer car last week, my cousin shook
his head in amazement. "You know, half of this car is worth about
$20,000." It put a bit of a glow on an otherwise cool day to realize
that he was right. High protein number one durum is at a premium price
this year and dropping it into a producer car put the icing on the cake.
I grabbed the mail on the way home when the job was done. I should have
waited a while to open it, what with the glow still lingering. The fuel
bill that came in that day's mail wiped off my smile and caused a
reassessment of my good fortune. Call it sticker shock, I guess, but the
bill for diesel fuel that accompanied this year's seeding brought a
different kind of shine to my face. That last fill cost me $1.15 per
litre for diesel, while gasoline carried a price of $1.21 a litre.
It prompted me to dig out last year's spring fuel bill. Back then, durum
may have been a fraction of today's price, but so was fuel, with diesel
at 72.9 cents a litre and gasoline at $106.9. Probably few farmers are
assuming the price has peaked either. If gasoline might hit $1.50 by
July, we can expect diesel to be close behind.
The increase in fuel costs has prompted many urban motorists to blow the
dust off the bicycle and has even started some debating the merits of
the city bus. Farmers don't get much use from those two items, burdened
down as we are by fuel tanks and tools and large implements, but farmers
too are looking for ways to cut fuel consumption.
When it comes to buying parts however, they may want to consider the
benefits of burning a bit more fuel, at least if they're within driving
distance of the U.S. Equipment parts, of every type and for every brand,
appear to be much lower priced in our neighbour to the south. While I
might have been able to understand this when the Canadian dollar was at
70 cents U.S., it becomes a bit more difficult to swallow when the
dollar is at par, or higher.
How big are the differences? I did some comparisons between prices in
Saskatchewan and in Minot, North Dakota, about 240 miles south east of
my farm. The differences were strikingly consistent, from John Deere to
New Holland to CIH and Versatile. Parts at Minot were generally about 24
percent lower than the same part in Saskatchewan. This held not only
from one manufacturer to another, but from tractors to haybines to
balers, and from small items to big.
A tachometer for an ageing 3020 John Deere tractor will set you back
$283 in Saskatchewan but only cost $230 in Minot. A hydraulic pump for a
somewhat newer 4430 costs $2,171 in Regina but you could save $421 by
taking that trip to North Dakota. A remanufactured engine for a 8460
John Deere tractor finds a price of $12,900 in Minot, but somehow is
worth $15,983 when the currency and location are Canadian.
While car buyers have complained bitterly about the difference in auto
prices between here and the U.S., to some positive effect, farmers have
been rather quiet about the prices they have to pay for parts. One
fellow at a parts counter assured me that the price difference had
indeed declined recently, but that only served to make me more annoyed
as I contemplated the rip-off I have apparently been enduring for some
time. He also said that the price spread on new equipment was hurting
their business.
Not every farmer in the west is close enough to a major U.S. city to run
down for every parts order. However, the farmer who needs a big ticket
repair item, or who compiles a list of smaller ones might find a
handsome reward in taking a trip south. If enough farmers do it,
Canadian dealers will have to find ways to pressure their parent
companies to stop treating Canadian farmers like a huge cash cow. If the
rise in the Canadian dollar has driven down the price of many of the
products we sell, we should at least be able to get some small benefit
from it.
(c) Paul Beingessner
Bemoaning the State of the Beef Industry
Column # 672 Bemoaning the State of the Beef Industry 02/06/08
From time to time, folks commenting on the state of the beef industry
in Canada will bemoan the fact that, post-BSE, we are still heavily
dependent on the U.S. as a market for our cattle. It seems, in fact,
that we have ramped up cattle exports to our southern neighbour to the
point where they now exceed the numbers we were shipping before Mad Cow
reared its ugly head.
While the moaners usually don't blame any specific group for this
short-sightedness, preferring instead to use the meaningless "we", it is
clear farmers are seen as one of the guilty parties. And they should be,
but not in the way you might think. Farmers in many parts of Canada did
their best to generate other ways of marketing their beef. They
supported a number of new beef slaughtering initiatives, most of them
focused on developing niche markets for some specialty type of beef, be
it grass-fed, natural, or cull cow. This is what they did, but
unfortunately the results have been less than sterling. Most of the
plans came to nothing, and most of those that got beyond the planning
stage didn't last long after opening.
These two things, the failure of local initiatives and the renewed focus
on American markets were predicted by many and were completely logical.
The local initiatives were doomed from the start. Most relied on overly
optimistic scenarios generated by consultants who knew that a consultant
with negative reports will have a relatively short career. They were
likely the same consulting firms that a decade ago were recommending a
pulse processing plant at every siding. Prior to that, they made their
living by recommending hog barns ad infinitum.
In truth, niche markets for specially raised beef have always been quite
limited. Even discriminating consumers will only pay a small premium for
their vices. And the cull cow and bull operations have to compete with a
product that oozes from the large packers in unbelievable quantities.
Competing head on with Cargill is not a recipe for success.
That Canadian cattle are again gravitating to the U.S. in huge numbers
is scant surprise. Cattle will go where the cheapest feed and the lowest
cost labour are found. American corn, biofuel demand notwithstanding, is
still a cheaper feed than nearly anything else. And Alberta's packing
plants, the largest in Canada, are competing for labour with a booming
oil sector that pays real wages.
That my friends is the free market. In today's environment of global,
monopoly capitalism, farmers can have little impact on the direction
that market moves. There certainly never was any opportunity for farmers
to somehow influence the development of new markets for Canadian beef.
Farmers are not players in the packing industry today, except in Quebec.
That business is held tightly in the grip of about four companies. They
are the ones who develop markets, and they do so in whatever way suits
their needs, not the needs of Canadian farmers and ranchers. Nor is
their much point blaming the big packers. They are just doing what they
are able to do in an environment where there are few rules.
In light of this, why do I say that farmers are to blame? It is because
farmers typically see only three possible responses to a melt-down like
that caused by BSE. They can fold and leave the industry, they can
decide to tough it out and hope for better times, or they can remain
peripherally in the industry while finding other ways to make a living.
The other possibility, that of working together to find the root causes
of the industry's troubles and exploring alternative ways of organizing
the industry, doesn't seem to be on the radar for farmers.
Now, as feedlots close in beef country we are told to find a new way of
raising our cattle. Feed grains are too expensive so cattle must stay on
grass longer and face shorter periods in a feedlot. This is not a bad
thing. It may in fact be a good thing from an environmental and animal
welfare point of view. But the reality is that farmers are told to keep
their calves six to 12 months longer, and then sell them for the same
price they were getting for six-month-old calves in 2002. How does that
work?
Meanwhile, beef industry observers are telling us that those who hang on
are going to be the winners when the price eventually goes up. Sounds
like some consultants I know...
(c) Paul Beingessner
From time to time, folks commenting on the state of the beef industry
in Canada will bemoan the fact that, post-BSE, we are still heavily
dependent on the U.S. as a market for our cattle. It seems, in fact,
that we have ramped up cattle exports to our southern neighbour to the
point where they now exceed the numbers we were shipping before Mad Cow
reared its ugly head.
While the moaners usually don't blame any specific group for this
short-sightedness, preferring instead to use the meaningless "we", it is
clear farmers are seen as one of the guilty parties. And they should be,
but not in the way you might think. Farmers in many parts of Canada did
their best to generate other ways of marketing their beef. They
supported a number of new beef slaughtering initiatives, most of them
focused on developing niche markets for some specialty type of beef, be
it grass-fed, natural, or cull cow. This is what they did, but
unfortunately the results have been less than sterling. Most of the
plans came to nothing, and most of those that got beyond the planning
stage didn't last long after opening.
These two things, the failure of local initiatives and the renewed focus
on American markets were predicted by many and were completely logical.
The local initiatives were doomed from the start. Most relied on overly
optimistic scenarios generated by consultants who knew that a consultant
with negative reports will have a relatively short career. They were
likely the same consulting firms that a decade ago were recommending a
pulse processing plant at every siding. Prior to that, they made their
living by recommending hog barns ad infinitum.
In truth, niche markets for specially raised beef have always been quite
limited. Even discriminating consumers will only pay a small premium for
their vices. And the cull cow and bull operations have to compete with a
product that oozes from the large packers in unbelievable quantities.
Competing head on with Cargill is not a recipe for success.
That Canadian cattle are again gravitating to the U.S. in huge numbers
is scant surprise. Cattle will go where the cheapest feed and the lowest
cost labour are found. American corn, biofuel demand notwithstanding, is
still a cheaper feed than nearly anything else. And Alberta's packing
plants, the largest in Canada, are competing for labour with a booming
oil sector that pays real wages.
That my friends is the free market. In today's environment of global,
monopoly capitalism, farmers can have little impact on the direction
that market moves. There certainly never was any opportunity for farmers
to somehow influence the development of new markets for Canadian beef.
Farmers are not players in the packing industry today, except in Quebec.
That business is held tightly in the grip of about four companies. They
are the ones who develop markets, and they do so in whatever way suits
their needs, not the needs of Canadian farmers and ranchers. Nor is
their much point blaming the big packers. They are just doing what they
are able to do in an environment where there are few rules.
In light of this, why do I say that farmers are to blame? It is because
farmers typically see only three possible responses to a melt-down like
that caused by BSE. They can fold and leave the industry, they can
decide to tough it out and hope for better times, or they can remain
peripherally in the industry while finding other ways to make a living.
The other possibility, that of working together to find the root causes
of the industry's troubles and exploring alternative ways of organizing
the industry, doesn't seem to be on the radar for farmers.
Now, as feedlots close in beef country we are told to find a new way of
raising our cattle. Feed grains are too expensive so cattle must stay on
grass longer and face shorter periods in a feedlot. This is not a bad
thing. It may in fact be a good thing from an environmental and animal
welfare point of view. But the reality is that farmers are told to keep
their calves six to 12 months longer, and then sell them for the same
price they were getting for six-month-old calves in 2002. How does that
work?
Meanwhile, beef industry observers are telling us that those who hang on
are going to be the winners when the price eventually goes up. Sounds
like some consultants I know...
(c) Paul Beingessner
Joy in Mudville
Column # 671 Joy in Mudville 26/05/08
The drought affecting farmers in many parts of the prairie provinces is
starting to take on frightening proportions. That there is a drought is
not news for farmers south of the Trans Canada Highway, who have endured
several years of it, but even these weather-beaten folk might be
surprised to hear how far afield that drought has travelled. A recent
listing of rainfall in Saskatchewan from April 1 onward showed that the
three driest points in the province were Estevan (south east), Val Marie
(south west) and Prince Albert (north central). While a few pockets have
received adequate rain, there is a lot of dry land in between.
Travelling west on the Trans Canada last week, I saw Reed Lake, a saline
lake that butts against the highway east of Swift Current. In the spring
it is usually teeming with shorebirds and waterfowl. It was a first for
me to see the lake entirely dry, its salt-encrusted shores now extending
south to the horizon.
Closer to home, the coulees and creek that provide surface water and
shallow wells for many farmers in this area failed to run at all this
spring. It is only the second time in my life I can recall this
happening. Sloughs in the Missouri Couteau west and south of our farm,
which usually produce ducks in the spring and hay in late summer, are
dry. Pastures have hardly grown an inch or two, and farmers are
struggling to find enough grass to carry their livestock while they
await the rain. We have had no really meaningful rain since last May.
The prospect of poor crops in one of the best years for price in recent
memory might make a grain farmer glum, especially considering the value
of inputs that went into the ground with that seed. Bit it is livestock
producers who have a great deal to sweat about immediately. Most have
consumed any reserves of hay they may have had, and pastures were
overgrazed in many areas last year. Hay grows in May and June, and May
has been abysmally dry. There are about four weeks left to make a hay
crop, and it will take a lot of rain.
So it's been tough around here. I've tried to hold the cattle off their
summer pasture, as the grass is very short, and won't last long, but I
figure the spring pasture will hold them for only a few more days.
Fretting and staring at the sky have become near-constant occupations on
the farm.
Fortunately, things get put into perspective now and then, and a phone
call from a nephew did that for me today. He told a story of a rancher
in the Climax area in southwest Saskatchewan who had purchased a large
quantity of hay from my nephew's neighbour last year. The hay had to be
trucked several hundred miles. In the winter, the rancher bought the
rest of the hay. He phoned the fellow who sold the hay recently to ask
what things looked like for this year. The rancher had fed all the hay,
his pastures were bare from lack of rain and his dugouts had gone
completely dry. He had broken up some of his hay and pastureland in an
attempt to starve the flourishing gopher populations. He was now looking
for a place to pasture his cows in the northern grainbelt. No doubt his
neighbours are in the same position.
Bad as our own situation is, that story made me stop to count my
blessings. If the drought continues, we may be in that rancher's
position soon, but we aren't quite there yet.
This weekend, a bit of rain fell across much of the southern prairies.
There was great joy in mudville at the notion that crops in dry soil now
at least have a chance to germinate. It was only a half-inch, but at
least we know now that it can still rain in this country. We were
starting to doubt that.
(c) Paul Beingessner
The drought affecting farmers in many parts of the prairie provinces is
starting to take on frightening proportions. That there is a drought is
not news for farmers south of the Trans Canada Highway, who have endured
several years of it, but even these weather-beaten folk might be
surprised to hear how far afield that drought has travelled. A recent
listing of rainfall in Saskatchewan from April 1 onward showed that the
three driest points in the province were Estevan (south east), Val Marie
(south west) and Prince Albert (north central). While a few pockets have
received adequate rain, there is a lot of dry land in between.
Travelling west on the Trans Canada last week, I saw Reed Lake, a saline
lake that butts against the highway east of Swift Current. In the spring
it is usually teeming with shorebirds and waterfowl. It was a first for
me to see the lake entirely dry, its salt-encrusted shores now extending
south to the horizon.
Closer to home, the coulees and creek that provide surface water and
shallow wells for many farmers in this area failed to run at all this
spring. It is only the second time in my life I can recall this
happening. Sloughs in the Missouri Couteau west and south of our farm,
which usually produce ducks in the spring and hay in late summer, are
dry. Pastures have hardly grown an inch or two, and farmers are
struggling to find enough grass to carry their livestock while they
await the rain. We have had no really meaningful rain since last May.
The prospect of poor crops in one of the best years for price in recent
memory might make a grain farmer glum, especially considering the value
of inputs that went into the ground with that seed. Bit it is livestock
producers who have a great deal to sweat about immediately. Most have
consumed any reserves of hay they may have had, and pastures were
overgrazed in many areas last year. Hay grows in May and June, and May
has been abysmally dry. There are about four weeks left to make a hay
crop, and it will take a lot of rain.
So it's been tough around here. I've tried to hold the cattle off their
summer pasture, as the grass is very short, and won't last long, but I
figure the spring pasture will hold them for only a few more days.
Fretting and staring at the sky have become near-constant occupations on
the farm.
Fortunately, things get put into perspective now and then, and a phone
call from a nephew did that for me today. He told a story of a rancher
in the Climax area in southwest Saskatchewan who had purchased a large
quantity of hay from my nephew's neighbour last year. The hay had to be
trucked several hundred miles. In the winter, the rancher bought the
rest of the hay. He phoned the fellow who sold the hay recently to ask
what things looked like for this year. The rancher had fed all the hay,
his pastures were bare from lack of rain and his dugouts had gone
completely dry. He had broken up some of his hay and pastureland in an
attempt to starve the flourishing gopher populations. He was now looking
for a place to pasture his cows in the northern grainbelt. No doubt his
neighbours are in the same position.
Bad as our own situation is, that story made me stop to count my
blessings. If the drought continues, we may be in that rancher's
position soon, but we aren't quite there yet.
This weekend, a bit of rain fell across much of the southern prairies.
There was great joy in mudville at the notion that crops in dry soil now
at least have a chance to germinate. It was only a half-inch, but at
least we know now that it can still rain in this country. We were
starting to doubt that.
(c) Paul Beingessner
When Mud Pies Are No Longer a Game
Column # 670 19/05/08
When I was a kid, my two older sisters were experts at making mud pies.
In fact, their expertise went far beyond the lowly mud pie. They made
mud cookies, mud cakes, mud vegetables and even mud mashed potatoes.
After careful shaping and drying in the sun, they looked good enough to
eat. Which we did, sort of. Part of getting into the game, and being
allowed to be there at all, was to play along with the fantasy,
pretending to nibble at the food, while exclaiming over the skill of the
cooks.
My sisters eventually went on to other things, like teaching and
nursing. But it is kind of comforting to know that, had they not been
successful at these occupations, they could have put the skills of
childhood to good use, even as adults. They could have, that is, if they
lived in Haiti. In Haiti, grown people make mud cookies. But, unlike my
younger siblings and me, eating them isn't a matter of pretending. The
cookies, made of a soft clay mixed with salt, water and shortening, are
the way impoverished Haitians stave off hunger pains when they can't
afford real food. It's a story that almost beggars belief.
Haiti is undoubtedly the poorest country in the Western Hemisphere.
Unlike many third world countries that have at least held their own,
Haiti's per capita GDP is far smaller than it was 30 years ago. Yet, the
country of eight million is home to a tiny elite, a few thousand
families that are tremendously wealthy, and control the Haitian economy.
This elite shops in Miami, sends its children to Europe to be educated,
and lives in a world completely unlike the 80 percent of Haitians who
live in grinding poverty.
Haiti's poverty is no accident however. It is partly due to years of
military dictatorships that were supported by the U.S., and partly due
to "structural adjustments" that the World Bank forced upon the country
as a precondition to receiving aid. The Bank's economic plan for Haiti
included privatizing key infrastructure and entrusting the delivery of
education, health, family planning, and water supply and sanitation to
private corporations. This was supposed to stimulate the Haitian economy
and bring investment into the country. Never mind that developed
countries generally wouldn't dream of turning these services over to
for-profit enterprises.
As part of this structural change, Haiti opened its border to imports of
food. The resulting flood of cheap food drove local farmers out of
business and reduced local food production. Once a rice exporter, Haiti
now relies on imports for over 80 percent of rice consumption. With food
prices rising around the world this year, imported food is no longer so
cheap. The $2 a day earned by someone lucky enough to have a job in
Haiti will buy only a couple cups of rice.
Canadian farmers are well aware of the benefits for us of trade
agreements that lower tariff barriers. We have spent years watching the
world trade talks, with their improbable promise of prosperity for all,
flounder over this issue. What we don't like to think about are the
effects trade liberalization might have on farmers in other countries.
The example of Haiti, the most "open" country in the region, is far from
unusual. With our superior technology and government subsidies, rich
countries can often insert their farm production into countries that
can't possibly compete. The result for the poor country's food
sovereignty and agriculture sector can be devastating.
Farmers in Canada have been an unhappy lot for decades. Current grain
prices portend potential for a change to their circumstances, but some
of the current upturn in prices is being bought at the expense of
farmers elsewhere. We should remember that when our politicians push
freer trade as the answer to our problems.
(c) Paul Beingessner
When I was a kid, my two older sisters were experts at making mud pies.
In fact, their expertise went far beyond the lowly mud pie. They made
mud cookies, mud cakes, mud vegetables and even mud mashed potatoes.
After careful shaping and drying in the sun, they looked good enough to
eat. Which we did, sort of. Part of getting into the game, and being
allowed to be there at all, was to play along with the fantasy,
pretending to nibble at the food, while exclaiming over the skill of the
cooks.
My sisters eventually went on to other things, like teaching and
nursing. But it is kind of comforting to know that, had they not been
successful at these occupations, they could have put the skills of
childhood to good use, even as adults. They could have, that is, if they
lived in Haiti. In Haiti, grown people make mud cookies. But, unlike my
younger siblings and me, eating them isn't a matter of pretending. The
cookies, made of a soft clay mixed with salt, water and shortening, are
the way impoverished Haitians stave off hunger pains when they can't
afford real food. It's a story that almost beggars belief.
Haiti is undoubtedly the poorest country in the Western Hemisphere.
Unlike many third world countries that have at least held their own,
Haiti's per capita GDP is far smaller than it was 30 years ago. Yet, the
country of eight million is home to a tiny elite, a few thousand
families that are tremendously wealthy, and control the Haitian economy.
This elite shops in Miami, sends its children to Europe to be educated,
and lives in a world completely unlike the 80 percent of Haitians who
live in grinding poverty.
Haiti's poverty is no accident however. It is partly due to years of
military dictatorships that were supported by the U.S., and partly due
to "structural adjustments" that the World Bank forced upon the country
as a precondition to receiving aid. The Bank's economic plan for Haiti
included privatizing key infrastructure and entrusting the delivery of
education, health, family planning, and water supply and sanitation to
private corporations. This was supposed to stimulate the Haitian economy
and bring investment into the country. Never mind that developed
countries generally wouldn't dream of turning these services over to
for-profit enterprises.
As part of this structural change, Haiti opened its border to imports of
food. The resulting flood of cheap food drove local farmers out of
business and reduced local food production. Once a rice exporter, Haiti
now relies on imports for over 80 percent of rice consumption. With food
prices rising around the world this year, imported food is no longer so
cheap. The $2 a day earned by someone lucky enough to have a job in
Haiti will buy only a couple cups of rice.
Canadian farmers are well aware of the benefits for us of trade
agreements that lower tariff barriers. We have spent years watching the
world trade talks, with their improbable promise of prosperity for all,
flounder over this issue. What we don't like to think about are the
effects trade liberalization might have on farmers in other countries.
The example of Haiti, the most "open" country in the region, is far from
unusual. With our superior technology and government subsidies, rich
countries can often insert their farm production into countries that
can't possibly compete. The result for the poor country's food
sovereignty and agriculture sector can be devastating.
Farmers in Canada have been an unhappy lot for decades. Current grain
prices portend potential for a change to their circumstances, but some
of the current upturn in prices is being bought at the expense of
farmers elsewhere. We should remember that when our politicians push
freer trade as the answer to our problems.
(c) Paul Beingessner
Viterra Takes a Page from Monsanto
Column # 669 12/05/08
While I don't expect to get dragged through the court system anytime
soon, I did get an inkling last week of how Percy Schmeiser must have
felt when he got that first letter from Monsanto. Mine came in the form
of a letter from Viterra, that amalgam of the once-farmer-owned prairie
grain companies. It began politely enough, thanking me for my business,
but soon turned ugly. Viterra, it seems, is about to become the Monsanto
of durum.
Monsanto, of course, is famous for suing farmers it believes have
infringed on its patent over the Roundup Ready gene. Percy Schmeiser is
likely the best known farmer to reap Monsanto's wrath, at least in
Canada, but he if far from the only one. Monsanto has hounded thousands
of farmers who it claims have grown Roundup Ready varieties of several
crops without paying the royalty the company demands. Some have ended up
in jail, many in financial ruin. Few had the nerve to defend themselves
to the extent that Percy did.
While Viterra doesn't own any genes related to durum, it does have
control over a couple of varieties - Navigator and Commander. Viterra
controls the production, sale and handling of these varieties. If you
want to grow them, you have to buy registered seed each year from
Viterra. You have to sell all your production to Viterra. And you have
to buy crop inputs, usually a certain dollar amount from Viterra. If
your crop is ruined by weather, you have to account to Viterra for how
you have disposed of the production.
Viterra, it appears, believes that farmers are not following the rules
with its durum varieties. The letter was to remind me of my "contractual
obligations under these Identity Preserved (IP) production contracts."
While Viterra is confident most farmers are following the terms of these
contracts, "regrettably, some are not". Then comes the threat, "Viterra
is considering all remedies, including legal action, to enforce these
rights and protect our IP programs."
Viterra, according to one source in the grain industry, is convinced a
great deal of Navigator durum is being grown outside its contracts, and
delivered to elevators as common durum. It is determined to get this
breach of its rules under control.
While the letter from Viterra made me feel real special, I suspect an
awful lot of farmers have received the same. Personally, I'm not sure
why I was on Viterra's list, since I haven't done any business of any
kind with the company for about a decade. Nor have I ever grown
Navigator or Commander durum.
So why do people grow these varieties, despite the downside of having to
buy new seed each year and being unable to access competitive buyers for
their production? Perhaps the biggest incentive is the guarantee that
the CWB will take all the Navigator that is produced under contract each
year. Navigator has one feature that is relatively unique among durums
at this time. It has a brighter yellow pigment in the seed and hence
produces brighter yellow pasta. There is a niche market for a small
amount of this durum, and Viterra limits production to this amount by
limiting the contracts it lets out.
Commander durum has less to commend it. Yields are fairly high relative
to other varieties, and like Navigator, Commander has stronger gluten
than other durums. However, Commander has the very undesirable habit of
accumulating cadmium in its seed. Cadmium is a toxic heavy metal that
has become a source of concern to consumers of durum. The CWB limits
contracts for Commander in certain parts of the prairies where cadmium
accumulation is especially problematic. Like Navigator, Commander also
limits what growers can do with their production. Many farmers don't see
the closed loop system as a desirable thing. There is some evidence to
indicate that farmers whose marketing options are restricted by
contracts receive lower trucking premiums and poorer grades when they
sell their grain.
Fortunately, those wanting to grow stronger gluten durum have an
alternative. Strongfield durum, developed by the same Agriculture Canada
scientists who developed Navigator and Commander, is a strong gluten
durum with superior milling qualities. It has better yields that
Navigator, and, with it being licensed to SeCan, farmers are able to
keep their own seed for replanting, and are not nearly so restricted in
marketing options.
The CWB has been anxious to get Strongfield into greater production (it
occupied 43% durum acres in Saskatchewan last year) in order to improve
the quality of the durum it sells. The CWB has also generally required
companies that want contracts for Strongfield to allow farmers to
replant their own seed.
Viterra's aggressive measures to protect its control over Navigator will
not sit well with many farmers. No one likes to think that the future of
grain production lies in closed loop contracts that limit a farmer's
access to both markets and farm supplies. The huge growth in Strongfield
acres indicates just that. Rumour has it that Viterra hasn't limited its
threats to farmers. Other grain companies have been told that they might
be held liable if they buy Navigator durum. At least one company
responded by saying that if Viterra allowed Navigator to contaminate its
elevators, Viterra would be held responsible.
(c) Paul Beingessner
While I don't expect to get dragged through the court system anytime
soon, I did get an inkling last week of how Percy Schmeiser must have
felt when he got that first letter from Monsanto. Mine came in the form
of a letter from Viterra, that amalgam of the once-farmer-owned prairie
grain companies. It began politely enough, thanking me for my business,
but soon turned ugly. Viterra, it seems, is about to become the Monsanto
of durum.
Monsanto, of course, is famous for suing farmers it believes have
infringed on its patent over the Roundup Ready gene. Percy Schmeiser is
likely the best known farmer to reap Monsanto's wrath, at least in
Canada, but he if far from the only one. Monsanto has hounded thousands
of farmers who it claims have grown Roundup Ready varieties of several
crops without paying the royalty the company demands. Some have ended up
in jail, many in financial ruin. Few had the nerve to defend themselves
to the extent that Percy did.
While Viterra doesn't own any genes related to durum, it does have
control over a couple of varieties - Navigator and Commander. Viterra
controls the production, sale and handling of these varieties. If you
want to grow them, you have to buy registered seed each year from
Viterra. You have to sell all your production to Viterra. And you have
to buy crop inputs, usually a certain dollar amount from Viterra. If
your crop is ruined by weather, you have to account to Viterra for how
you have disposed of the production.
Viterra, it appears, believes that farmers are not following the rules
with its durum varieties. The letter was to remind me of my "contractual
obligations under these Identity Preserved (IP) production contracts."
While Viterra is confident most farmers are following the terms of these
contracts, "regrettably, some are not". Then comes the threat, "Viterra
is considering all remedies, including legal action, to enforce these
rights and protect our IP programs."
Viterra, according to one source in the grain industry, is convinced a
great deal of Navigator durum is being grown outside its contracts, and
delivered to elevators as common durum. It is determined to get this
breach of its rules under control.
While the letter from Viterra made me feel real special, I suspect an
awful lot of farmers have received the same. Personally, I'm not sure
why I was on Viterra's list, since I haven't done any business of any
kind with the company for about a decade. Nor have I ever grown
Navigator or Commander durum.
So why do people grow these varieties, despite the downside of having to
buy new seed each year and being unable to access competitive buyers for
their production? Perhaps the biggest incentive is the guarantee that
the CWB will take all the Navigator that is produced under contract each
year. Navigator has one feature that is relatively unique among durums
at this time. It has a brighter yellow pigment in the seed and hence
produces brighter yellow pasta. There is a niche market for a small
amount of this durum, and Viterra limits production to this amount by
limiting the contracts it lets out.
Commander durum has less to commend it. Yields are fairly high relative
to other varieties, and like Navigator, Commander has stronger gluten
than other durums. However, Commander has the very undesirable habit of
accumulating cadmium in its seed. Cadmium is a toxic heavy metal that
has become a source of concern to consumers of durum. The CWB limits
contracts for Commander in certain parts of the prairies where cadmium
accumulation is especially problematic. Like Navigator, Commander also
limits what growers can do with their production. Many farmers don't see
the closed loop system as a desirable thing. There is some evidence to
indicate that farmers whose marketing options are restricted by
contracts receive lower trucking premiums and poorer grades when they
sell their grain.
Fortunately, those wanting to grow stronger gluten durum have an
alternative. Strongfield durum, developed by the same Agriculture Canada
scientists who developed Navigator and Commander, is a strong gluten
durum with superior milling qualities. It has better yields that
Navigator, and, with it being licensed to SeCan, farmers are able to
keep their own seed for replanting, and are not nearly so restricted in
marketing options.
The CWB has been anxious to get Strongfield into greater production (it
occupied 43% durum acres in Saskatchewan last year) in order to improve
the quality of the durum it sells. The CWB has also generally required
companies that want contracts for Strongfield to allow farmers to
replant their own seed.
Viterra's aggressive measures to protect its control over Navigator will
not sit well with many farmers. No one likes to think that the future of
grain production lies in closed loop contracts that limit a farmer's
access to both markets and farm supplies. The huge growth in Strongfield
acres indicates just that. Rumour has it that Viterra hasn't limited its
threats to farmers. Other grain companies have been told that they might
be held liable if they buy Navigator durum. At least one company
responded by saying that if Viterra allowed Navigator to contaminate its
elevators, Viterra would be held responsible.
(c) Paul Beingessner
Saskatchewan RMs Take a Beating From Transportation
Column # 668
Although it may seem as if the prairie branch line rail network has been
completely skeletonized by the major railways, the job is not yet truly
complete. CP still has 911 kilometres of track on its Three-Year Plan
for abandonment in the prairie provinces, and CN has 613 kilometres. Nor
does this rule out further abandonments by the major carriers. At least
one major railway has stated that there are still too many grain
elevator points and by extension, too many rail lines.
When the railways seek to abandon track, there is a formal process laid
out in the Canada Transportation Act. At one time, prior to the passage
of this act, the Transportation Agency had to take public interest into
account in deciding whether or not to allow an abandonment. That idea
was vanquished some time ago. The railways merely have to follow a
prescribed procedure, and cannot be prevented from abandoning track, no
matter what the government may think. It isn't exactly what the
country's founding fathers had in mind when they granted the original
railway charters.
The only defence of the public interest left in federal rail legislation
is the stipulation that a railway must offer a line for sale to various
levels of government before it can rip it out of the ground. Of course,
this wouldn't mean much if the railway could charge whatever price it
wanted. The rules say that the price will be the net salvage value of
the track - the amount of money the railway would get by selling the
materials less the cost of tearing out those materials. If the parties
can't agree on that amount, the Canadian Transportation Agency (CTA)
will decide.
Until recently, the Agency has been fairly reasonable in these
determinations. Neither party usually got what it wanted completely. But
two recent net salvage value determinations on Saskatchewan branch lines
seem to indicate the tide has turned in the railways' favour. The new
Members of the Agency, freshly appointed by the Harper government, gave
the railways a huge and questionable bonus in these recent rulings.
The bonus revolves around a section of the Canada Transportation Act
that requires the railways to pay to municipal governments, on
abandonment, an amount equal to $30,000 per mile, for each mile of rail
line that runs through the municipality. This provision only applies to
grain dependent branch lines in western Canada. The rationale for this
was to compensate municipalities for road costs they would incur when
rail service ended.
It would seem this condition imposes quite an obligation on the
railways. Prior to the recent run-up in commodity markets, including
steel, a railway would likely have ended up in a negative position when
it abandoned track. This makes it all the more odd that this provision
in the act was, if memory serves me correctly, first proposed by CP.
The fact is, CP was quite clever in suggesting it. Municipalities have
been fighting with each other ever since the act came into effect. While
one municipality may want to buy the track to operate a short line,
another will see only the short-term prospect of hundreds of thousands
of dollars of revenue.
Given this provision, it would seem logical that the net value of the
track would include consideration for the $30,000 a mile. It the railway
abandons the track, it can sell the materials but must take the payment
to municipalities out of that money. There is no way around this.
Salvaging the track includes a compensation cost to the municipalities.
At least that is what seems logical. Unfortunately for farmers on the
Radville and Bromhead branch lines, Harper's appointees to the Agency
don't appear to see it that way. If CP sells to the RM's in question, it
gets to have its cake and eat it too. The RMs pay the full price and
lose the benefit of $30,000 per mile. And if they want to start a short
line, they are still at the mercy of CP as to all and any conditions the
line would run under.
To top it off, the Agency also ruled against the RMs where their
reclamation bylaws were concerned. Having seen the condition of many
abandoned branch lines, some municipalities enacted bylaws requiring the
railways to clean up abandoned railway sites. The RMs in this case felt
the amount of such a clean up should be deducted from the salvage value.
Again the Agency ruled in CP's favour on this.
The resulting purchase prices for these branch lines are exceedingly
high. It is possible that the Agency's rulings might fit the letter of
the law as laid out in the act, but they violate any sense of natural
justice.
There is one last recourse in this case. The rulings can be appealed to
the federal court of Canada. A successful appeal would have implications
far beyond the two branch lines in question, and extend to the other
1300 kilometres on the railways' plans for discontinuance.
Given the cost of such an appeal, and the wide implications, the
government of Saskatchewan should consider funding it. For a province
swimming in oil money, it would be a small amount. For some beleaguered
RMs, it would be a godsend.
(c) Paul Beingessner
Although it may seem as if the prairie branch line rail network has been
completely skeletonized by the major railways, the job is not yet truly
complete. CP still has 911 kilometres of track on its Three-Year Plan
for abandonment in the prairie provinces, and CN has 613 kilometres. Nor
does this rule out further abandonments by the major carriers. At least
one major railway has stated that there are still too many grain
elevator points and by extension, too many rail lines.
When the railways seek to abandon track, there is a formal process laid
out in the Canada Transportation Act. At one time, prior to the passage
of this act, the Transportation Agency had to take public interest into
account in deciding whether or not to allow an abandonment. That idea
was vanquished some time ago. The railways merely have to follow a
prescribed procedure, and cannot be prevented from abandoning track, no
matter what the government may think. It isn't exactly what the
country's founding fathers had in mind when they granted the original
railway charters.
The only defence of the public interest left in federal rail legislation
is the stipulation that a railway must offer a line for sale to various
levels of government before it can rip it out of the ground. Of course,
this wouldn't mean much if the railway could charge whatever price it
wanted. The rules say that the price will be the net salvage value of
the track - the amount of money the railway would get by selling the
materials less the cost of tearing out those materials. If the parties
can't agree on that amount, the Canadian Transportation Agency (CTA)
will decide.
Until recently, the Agency has been fairly reasonable in these
determinations. Neither party usually got what it wanted completely. But
two recent net salvage value determinations on Saskatchewan branch lines
seem to indicate the tide has turned in the railways' favour. The new
Members of the Agency, freshly appointed by the Harper government, gave
the railways a huge and questionable bonus in these recent rulings.
The bonus revolves around a section of the Canada Transportation Act
that requires the railways to pay to municipal governments, on
abandonment, an amount equal to $30,000 per mile, for each mile of rail
line that runs through the municipality. This provision only applies to
grain dependent branch lines in western Canada. The rationale for this
was to compensate municipalities for road costs they would incur when
rail service ended.
It would seem this condition imposes quite an obligation on the
railways. Prior to the recent run-up in commodity markets, including
steel, a railway would likely have ended up in a negative position when
it abandoned track. This makes it all the more odd that this provision
in the act was, if memory serves me correctly, first proposed by CP.
The fact is, CP was quite clever in suggesting it. Municipalities have
been fighting with each other ever since the act came into effect. While
one municipality may want to buy the track to operate a short line,
another will see only the short-term prospect of hundreds of thousands
of dollars of revenue.
Given this provision, it would seem logical that the net value of the
track would include consideration for the $30,000 a mile. It the railway
abandons the track, it can sell the materials but must take the payment
to municipalities out of that money. There is no way around this.
Salvaging the track includes a compensation cost to the municipalities.
At least that is what seems logical. Unfortunately for farmers on the
Radville and Bromhead branch lines, Harper's appointees to the Agency
don't appear to see it that way. If CP sells to the RM's in question, it
gets to have its cake and eat it too. The RMs pay the full price and
lose the benefit of $30,000 per mile. And if they want to start a short
line, they are still at the mercy of CP as to all and any conditions the
line would run under.
To top it off, the Agency also ruled against the RMs where their
reclamation bylaws were concerned. Having seen the condition of many
abandoned branch lines, some municipalities enacted bylaws requiring the
railways to clean up abandoned railway sites. The RMs in this case felt
the amount of such a clean up should be deducted from the salvage value.
Again the Agency ruled in CP's favour on this.
The resulting purchase prices for these branch lines are exceedingly
high. It is possible that the Agency's rulings might fit the letter of
the law as laid out in the act, but they violate any sense of natural
justice.
There is one last recourse in this case. The rulings can be appealed to
the federal court of Canada. A successful appeal would have implications
far beyond the two branch lines in question, and extend to the other
1300 kilometres on the railways' plans for discontinuance.
Given the cost of such an appeal, and the wide implications, the
government of Saskatchewan should consider funding it. For a province
swimming in oil money, it would be a small amount. For some beleaguered
RMs, it would be a godsend.
(c) Paul Beingessner
Tuesday, April 22, 2008
Ask Me No Questions I'll Tell You No Lies 21/04/08
Sorry for the delay here. Freezing rain took out the power for 12 hours.
Chilled calf to deal with. I have a litany of excuses....
Column # 667 Ask Me No Questions I'll Tell You No Lies 21/04/08
Few things are as frustrating to parents of teenagers as their
children's communication skills. Or lack thereof. Having participated in
the rearing of 5 teenagers, I've been on the receiving end of my share
of monosyllabic grunts.
"Have you done your homework?"
"Uhnnn."
Even worse for parental blood pressure is the answer that never happens.
"When are you going to get off your duff and do your chores?" Silence.
The only discernible response is a slightly more frantic blur of finger
and thumb remorselessly pushing buttons, as eyes remain glued to the
television.
Of course I would never admit to the near uncontrollable urge to slap
someone up the side of the head. (Can the welfare still come and take
your kids when they're grown up and gone?)
There are many similarities between politicians and teenagers, most of
them centering on fabrication and a ceaseless focus on whether the
outcome of any situation will be good for me personally. Politicians and
kids share another similarity. It's the ability to completely ignore a
legitimate question, as if the questioner were one of those irritating
800 area code calls that we don't answer when they appear on our phone.
How many newspaper articles end with "the government has made no
response to the request"? How many radio interviews conclude with "no
one was available for comment"? For someone with a valid and important
question, it can be infuriating and disheartening.
Take, for example, the plight of hog producers in Canada. Repeated
requests for aid early this year were met with silence. It looked as if
governments had decided to take the course of letting the chips fall
where they would as far as hogs were concerned. Saskatchewan Minister of
Agriculture, after announcing a loan program, (gee, more debt, thanks a
lot) declared that his government had done all it could. The federal
government finally decided its assistance would be to kill as many sows
and boars are producers were willing to part with.
Right now, OmniTrax, the American company operating the rail line to
Churchill, must be feeling a similar frustration. OmniTrax is watching
the federal government preside over the chopping up of the fleet of
aluminum hopper cars. While the cars are pretty much obsolete for
hauling grain on Canada's mainline railways, due to limited capacity,
they might fit into the local hauling of products on the Bay line.
However, the dismembering continues and the federal government appears
to be ignoring OmniTrax's request for dialogue on the cars.
Beef producers know their own frustration with government silence.
Restrictions on the disposal of Specified Risk Materials add as much as
$80 to cost of slaughter and processing for a beef animal in Canada.
These are costs American packers do not bear, since their regulations
are much less strict. This cost puts Canadian packers at risk, since the
market in which they compete is largely continental. Continued requests
for the government to deal with a problem that is beyond industry's
ability to control have been met with little acknowledgement.
Government communications, of course, are not about facts or truth. They
are about spin. Unfortunately, this appears to be true of most
governments most of the time. If government thinks the public wouldn't
like the answer to a question, better to remain silent. One place this
may not work is in the House of Commons. However, when confronted with a
question that you can't avoid, politicians can still take another
course. Don't answer the question asked, answer some other question.
This was the situation facing Liberal MP Wayne Easter on April 8. Easter
asked Transport Minister Lawrence Cannon if the government intended to
conduct a full review of railway costs. Cannon's response must have left
Easter scratching his head. It went like this, "One of the first
initiatives we took was to stop the sale of the hopper cars (to
farmers). It was an excellent decision because it was something the
marketplace wanted. ...it was a way of diminishing and reducing costs to
the farmer."
It makes me think even politicians in the House of Commons must
occasionally want to slap someone up the side of the head.
(c) Paul Beingessner
Chilled calf to deal with. I have a litany of excuses....
Column # 667 Ask Me No Questions I'll Tell You No Lies 21/04/08
Few things are as frustrating to parents of teenagers as their
children's communication skills. Or lack thereof. Having participated in
the rearing of 5 teenagers, I've been on the receiving end of my share
of monosyllabic grunts.
"Have you done your homework?"
"Uhnnn."
Even worse for parental blood pressure is the answer that never happens.
"When are you going to get off your duff and do your chores?" Silence.
The only discernible response is a slightly more frantic blur of finger
and thumb remorselessly pushing buttons, as eyes remain glued to the
television.
Of course I would never admit to the near uncontrollable urge to slap
someone up the side of the head. (Can the welfare still come and take
your kids when they're grown up and gone?)
There are many similarities between politicians and teenagers, most of
them centering on fabrication and a ceaseless focus on whether the
outcome of any situation will be good for me personally. Politicians and
kids share another similarity. It's the ability to completely ignore a
legitimate question, as if the questioner were one of those irritating
800 area code calls that we don't answer when they appear on our phone.
How many newspaper articles end with "the government has made no
response to the request"? How many radio interviews conclude with "no
one was available for comment"? For someone with a valid and important
question, it can be infuriating and disheartening.
Take, for example, the plight of hog producers in Canada. Repeated
requests for aid early this year were met with silence. It looked as if
governments had decided to take the course of letting the chips fall
where they would as far as hogs were concerned. Saskatchewan Minister of
Agriculture, after announcing a loan program, (gee, more debt, thanks a
lot) declared that his government had done all it could. The federal
government finally decided its assistance would be to kill as many sows
and boars are producers were willing to part with.
Right now, OmniTrax, the American company operating the rail line to
Churchill, must be feeling a similar frustration. OmniTrax is watching
the federal government preside over the chopping up of the fleet of
aluminum hopper cars. While the cars are pretty much obsolete for
hauling grain on Canada's mainline railways, due to limited capacity,
they might fit into the local hauling of products on the Bay line.
However, the dismembering continues and the federal government appears
to be ignoring OmniTrax's request for dialogue on the cars.
Beef producers know their own frustration with government silence.
Restrictions on the disposal of Specified Risk Materials add as much as
$80 to cost of slaughter and processing for a beef animal in Canada.
These are costs American packers do not bear, since their regulations
are much less strict. This cost puts Canadian packers at risk, since the
market in which they compete is largely continental. Continued requests
for the government to deal with a problem that is beyond industry's
ability to control have been met with little acknowledgement.
Government communications, of course, are not about facts or truth. They
are about spin. Unfortunately, this appears to be true of most
governments most of the time. If government thinks the public wouldn't
like the answer to a question, better to remain silent. One place this
may not work is in the House of Commons. However, when confronted with a
question that you can't avoid, politicians can still take another
course. Don't answer the question asked, answer some other question.
This was the situation facing Liberal MP Wayne Easter on April 8. Easter
asked Transport Minister Lawrence Cannon if the government intended to
conduct a full review of railway costs. Cannon's response must have left
Easter scratching his head. It went like this, "One of the first
initiatives we took was to stop the sale of the hopper cars (to
farmers). It was an excellent decision because it was something the
marketplace wanted. ...it was a way of diminishing and reducing costs to
the farmer."
It makes me think even politicians in the House of Commons must
occasionally want to slap someone up the side of the head.
(c) Paul Beingessner
Piglet Kill Proposed to Solve Hog Woes 14/04/08
Column # 666 Piglet Kill Proposed to Solve Hog Woes 14/04/08
In virtually every farming enterprise, farms are getting larger. One
factor that has driven this is the ever-declining value of the
commodities farms produce. In constant dollars, the value of farm
products, whether grain, livestock or Christmas tree has not kept up
with every other cost farmers face. Farmers have survived by producing
more of those products per farm. So farms get bigger and rural
communities smaller.
If production were simply a matter of management, good farmers would
survive by getting larger. The less productive would fall by the
wayside. But it isn't that simple. A major reason is the incredible
unpredictability of both weather and prices. If you're losing money due
to low prices or poor production, being big is likely a greater problem
than being small.
The other problem with bigness is that everyone is on the same
bandwagon. The result is the consolidation of grain companies, chemical
and seed companies, machinery manufacturers and even input retailers.
Even the biggest farmer is no match for a Monsanto, Cargill or CP.
Nowhere can the problems of bigness be more clearly seen than in the hog
industry. At some point in the last century, governments and policy
makers became convinced there was an unlimited market in the world for
pigs. The rational was that as poorer countries developed, meat
consumption would rise, and since hogs and chickens are cheaper to raise
than cattle, they would be the ones in greatest demand. Policy makers
began to push hog production. Provincial governments all had their own
units within their departments of agriculture dedicated largely to
increasing the number of hogs produced in the province. Pigs would eat
the cheap feed grains. Pigs, which can breed like rabbits, could build
populations rapidly. Canadian pigs would be travelling the world. Raise
enough pigs and the processing facilities would come.
There were several problems with the whole scenario. Large hog barns
could indeed produce hogs cheaply. So cheaply, in fact, that soon small
producers were unable to cope with the ever-falling prices. They did
what hog producers have always done when markets fell. They went out of
pigs. The large ones left didn't respond to market signals in the same
way. They couldn't afford to shut down or limit production, thus
ensuring perpetually low prices. (Truth be told, low hog prices have
hurt the beef industry as well, as hogs compete in the supermarket with
beef and limit its price.)
As for Canadian pigs travelling the world, it turned out most of them
only made it to the U.S. As in the beef industry, Canada became fixated
on selling our pigs to a country swimming in pigs itself. That we were
able to do so was largely because of our low dollar, not some mythical
notion of western Canada as the "lowest cost producer".
If current and past hog prices weren't enough to make you weep, the
impending closure of the American border to hogs due to Country of
Origin Labelling (COOL) should have hog producers everywhere sobbing.
Labelling hogs as products of somewhere other than the U.S. is expected
to lower their value, so American slaughter plants have also said they
will not slaughter Canadian hogs under COOL. Just the fact that COOL
appears to be coming this fall has whacked Manitoba's isowean producers
on the snout. Isoweans are early-weaned piglets, many of which are
finished in the U.S. Those for sale now might not finish before COOL is
implemented, so some American finishers have broken contracts to buy
Manitoba piglets. Prices for isoweans have dropped as much as 90
percent.
Canada now has a program to pay hog producers to kill sows and boars and
stop producing pigs. Manitoba producers are calling for a similar
program to kill piglets, saying a 4 percent reduction in supply would
help to increase prices.
The entire situation is both sad and revolting, especially the waste of
good food and the destruction of baby animals. The heyday of this latest
surge in the hog industry lasted scarcely more than a decade for many
producers. Some of the earliest barns were closing their doors due to
bankruptcy as the last barns were being built. Whatever the outcome,
there will be a major correction in hog numbers, especially in western
Canada.
No one should be surprised. The market for pigs in Manitoba and
Saskatchewan is for about 300,000 hogs per year. We are producing five
million, and trying to export most of the surplus to the U.S., a country
that is awash in hogs itself, and remarkably protectionist. It is as
absurd as Canadian farmers who think that without the CWB, we could pour
our grain into the American's premium priced domestic market.
The ultimate irony is that while the industry is near collapse,
Manitoba's hog producers are up in arms because the provincial
government won't allow any new hogs barns to be built due to
environmental concerns.
So, let's tally it up.
At one time we had a hog industry with thousands of small players who
sold to a variety of packing plants. These farmers responded to market
signals and were able to move in and out of the industry because their
capital investment was often small and they were diversified. Hog prices
were low, so focus on the grain side. Hogs rise, re-open the barn.
Now we have government subsidies to kill pigs large and small and
dispose of them. Packing plants closing in western Canada while the hog
supply grows. Small producers all driven out of the business. A bunch of
much fancier empty barns than the last time this happened. And
government agencies that still have a mandate, I'll bet you anything, to
expand the hog industry in western Canada.
They say pigs are the smartest animal in the barnyard. I'm beginning to
think they could well be smarter than a lot of humans.
In virtually every farming enterprise, farms are getting larger. One
factor that has driven this is the ever-declining value of the
commodities farms produce. In constant dollars, the value of farm
products, whether grain, livestock or Christmas tree has not kept up
with every other cost farmers face. Farmers have survived by producing
more of those products per farm. So farms get bigger and rural
communities smaller.
If production were simply a matter of management, good farmers would
survive by getting larger. The less productive would fall by the
wayside. But it isn't that simple. A major reason is the incredible
unpredictability of both weather and prices. If you're losing money due
to low prices or poor production, being big is likely a greater problem
than being small.
The other problem with bigness is that everyone is on the same
bandwagon. The result is the consolidation of grain companies, chemical
and seed companies, machinery manufacturers and even input retailers.
Even the biggest farmer is no match for a Monsanto, Cargill or CP.
Nowhere can the problems of bigness be more clearly seen than in the hog
industry. At some point in the last century, governments and policy
makers became convinced there was an unlimited market in the world for
pigs. The rational was that as poorer countries developed, meat
consumption would rise, and since hogs and chickens are cheaper to raise
than cattle, they would be the ones in greatest demand. Policy makers
began to push hog production. Provincial governments all had their own
units within their departments of agriculture dedicated largely to
increasing the number of hogs produced in the province. Pigs would eat
the cheap feed grains. Pigs, which can breed like rabbits, could build
populations rapidly. Canadian pigs would be travelling the world. Raise
enough pigs and the processing facilities would come.
There were several problems with the whole scenario. Large hog barns
could indeed produce hogs cheaply. So cheaply, in fact, that soon small
producers were unable to cope with the ever-falling prices. They did
what hog producers have always done when markets fell. They went out of
pigs. The large ones left didn't respond to market signals in the same
way. They couldn't afford to shut down or limit production, thus
ensuring perpetually low prices. (Truth be told, low hog prices have
hurt the beef industry as well, as hogs compete in the supermarket with
beef and limit its price.)
As for Canadian pigs travelling the world, it turned out most of them
only made it to the U.S. As in the beef industry, Canada became fixated
on selling our pigs to a country swimming in pigs itself. That we were
able to do so was largely because of our low dollar, not some mythical
notion of western Canada as the "lowest cost producer".
If current and past hog prices weren't enough to make you weep, the
impending closure of the American border to hogs due to Country of
Origin Labelling (COOL) should have hog producers everywhere sobbing.
Labelling hogs as products of somewhere other than the U.S. is expected
to lower their value, so American slaughter plants have also said they
will not slaughter Canadian hogs under COOL. Just the fact that COOL
appears to be coming this fall has whacked Manitoba's isowean producers
on the snout. Isoweans are early-weaned piglets, many of which are
finished in the U.S. Those for sale now might not finish before COOL is
implemented, so some American finishers have broken contracts to buy
Manitoba piglets. Prices for isoweans have dropped as much as 90
percent.
Canada now has a program to pay hog producers to kill sows and boars and
stop producing pigs. Manitoba producers are calling for a similar
program to kill piglets, saying a 4 percent reduction in supply would
help to increase prices.
The entire situation is both sad and revolting, especially the waste of
good food and the destruction of baby animals. The heyday of this latest
surge in the hog industry lasted scarcely more than a decade for many
producers. Some of the earliest barns were closing their doors due to
bankruptcy as the last barns were being built. Whatever the outcome,
there will be a major correction in hog numbers, especially in western
Canada.
No one should be surprised. The market for pigs in Manitoba and
Saskatchewan is for about 300,000 hogs per year. We are producing five
million, and trying to export most of the surplus to the U.S., a country
that is awash in hogs itself, and remarkably protectionist. It is as
absurd as Canadian farmers who think that without the CWB, we could pour
our grain into the American's premium priced domestic market.
The ultimate irony is that while the industry is near collapse,
Manitoba's hog producers are up in arms because the provincial
government won't allow any new hogs barns to be built due to
environmental concerns.
So, let's tally it up.
At one time we had a hog industry with thousands of small players who
sold to a variety of packing plants. These farmers responded to market
signals and were able to move in and out of the industry because their
capital investment was often small and they were diversified. Hog prices
were low, so focus on the grain side. Hogs rise, re-open the barn.
Now we have government subsidies to kill pigs large and small and
dispose of them. Packing plants closing in western Canada while the hog
supply grows. Small producers all driven out of the business. A bunch of
much fancier empty barns than the last time this happened. And
government agencies that still have a mandate, I'll bet you anything, to
expand the hog industry in western Canada.
They say pigs are the smartest animal in the barnyard. I'm beginning to
think they could well be smarter than a lot of humans.
Life Can Be a Bummer 07/04/08
Column # 665 Life Can Be a Bummer 07/04/08
The subject matter for this story might seem a bit indelicate, but here
goes. We had a lamb born on the farm this year without a bum. Or, to put
it in language that might make it past the censor, it lacked an anal
opening.
As you can image, this is not good news for the lamb. Sheep are prone to
any number of deformities - cleft palates, missing eyes, spinal
deformations, and yes, absent orifices. The usual remedy to such
problems is a swift departure to lamb heaven at the hands of the
shepherd.
Our lamb was luckier, due to my reluctance to whack tiny bleating
creatures on the head, especially when they appear lively and happy,
with the innocence only a lamb can project. So when I noticed the half
day-old lamb lying on its side and straining in obvious discomfort, and
an inspection quickly revealed not even a trace of a rectal aperture, I
called my vet to seek counsel.
His outlook was gloomy. If the defect was severe enough, it seemed the
lamb might not even have a properly developed intestine. If so, it would
be dead by morning. If it were still alive, he could look at it then,
assuring me that it would be uncomfortable but not in a great deal of
pain.
At least the delay until morning would take part of the decision out of
my hands. If the lamb died, such was life. If it lived, I still had to
justify to myself the cost of the procedure, which I was pretty sure
would at least equal the value of the lamb full grown at market time.
As the lamb's luck would have it, she made it easily through the night.
I justified the decision to make the 40 kilometer trip to the vet by
hoping fervently that a small and simple, hence inexpensive incision
would right the matter.
Well, not quite. It turned out there was a quarter inch of tissue
between the lamb's smooth backside and his anal muscle. An incision
would simply grow shut. My vet's solution was to pull the anal tissue
forward and suture it to the outside. It was some pretty delicate and
nifty work. But it wasn't simple. A couple x-rays, some medication, it
all came to a bill for $140. Not much chance of making money on that
lamb. For the lamb, at least, it was a happy ending. She never looked
back and four weeks later I can't pick her out of the crowd.
It probably wasn't a real smart decision, and I likely wouldn't do it
again, despite my relatively soft heart. A livestock farmer can't afford
too many kind gestures these days if they cost money. The sad fact is
that today's livestock prices, and those of the last few years, mean
most farmers visit the vet only in extreme circumstances. The results
are sometimes not what farmers who generally love their animals would
really like.
Sheep may be an extreme example of this. There is almost nothing you can
take a single animal to the vet for that won't result in a bill greater
than the animal's value. Prolapsed uterus? We replace it ourselves, and
if we can't make it stay, we put the animal down. Impossibly large lamb
or a cervix that won't dilate? A caesarean is far too costly. Better, as
one vet advised me, to shoot the ewe and attempt to extract the lamb
alive afterwards. (It worked.)
The same applies to cattle, though there is of course more room to spend
money and still come out okay. Or, at least there was prior to the
collapse of the calf market last fall. More and more, farmers are
treating ailments that they would formerly have taken to a vet. If their
treatments fail, the cheapest alternative may be to put the animal down.
The problem is not with the rates rural veterinarians charge. They work
long hard hours and few make their fortune and retire early. The problem
is that the value of livestock has failed drastically to keep up with
the cost of living, or any other cost.
As I said earlier, no farmer wants to work outside his comfort zone with
animals. Nor does he want to put down an animal because routine
procedures are too costly to contemplate. Yet, there is no readily
discernible solution to this dilemma. Livestock prices will never move
in lock step with the cost of human labour or other inputs. The history
of modern agriculture is that prices for farm commodities have steadily
declined, relative to all other costs. Present government policies and
market trends don't appear likely to change that.
A partial solution to this sorry situation would be for governments to
financially assist rural vet clinics. If they could afford to lower
rates, farmers could afford to use them more. This would likely yield
greater returns to farmers and their communities than many of the
"value-added" schemes that garner government support. It should also
make the animal welfare folks happy. And it would keep life for lambs
like mine from being a real bummer.
The subject matter for this story might seem a bit indelicate, but here
goes. We had a lamb born on the farm this year without a bum. Or, to put
it in language that might make it past the censor, it lacked an anal
opening.
As you can image, this is not good news for the lamb. Sheep are prone to
any number of deformities - cleft palates, missing eyes, spinal
deformations, and yes, absent orifices. The usual remedy to such
problems is a swift departure to lamb heaven at the hands of the
shepherd.
Our lamb was luckier, due to my reluctance to whack tiny bleating
creatures on the head, especially when they appear lively and happy,
with the innocence only a lamb can project. So when I noticed the half
day-old lamb lying on its side and straining in obvious discomfort, and
an inspection quickly revealed not even a trace of a rectal aperture, I
called my vet to seek counsel.
His outlook was gloomy. If the defect was severe enough, it seemed the
lamb might not even have a properly developed intestine. If so, it would
be dead by morning. If it were still alive, he could look at it then,
assuring me that it would be uncomfortable but not in a great deal of
pain.
At least the delay until morning would take part of the decision out of
my hands. If the lamb died, such was life. If it lived, I still had to
justify to myself the cost of the procedure, which I was pretty sure
would at least equal the value of the lamb full grown at market time.
As the lamb's luck would have it, she made it easily through the night.
I justified the decision to make the 40 kilometer trip to the vet by
hoping fervently that a small and simple, hence inexpensive incision
would right the matter.
Well, not quite. It turned out there was a quarter inch of tissue
between the lamb's smooth backside and his anal muscle. An incision
would simply grow shut. My vet's solution was to pull the anal tissue
forward and suture it to the outside. It was some pretty delicate and
nifty work. But it wasn't simple. A couple x-rays, some medication, it
all came to a bill for $140. Not much chance of making money on that
lamb. For the lamb, at least, it was a happy ending. She never looked
back and four weeks later I can't pick her out of the crowd.
It probably wasn't a real smart decision, and I likely wouldn't do it
again, despite my relatively soft heart. A livestock farmer can't afford
too many kind gestures these days if they cost money. The sad fact is
that today's livestock prices, and those of the last few years, mean
most farmers visit the vet only in extreme circumstances. The results
are sometimes not what farmers who generally love their animals would
really like.
Sheep may be an extreme example of this. There is almost nothing you can
take a single animal to the vet for that won't result in a bill greater
than the animal's value. Prolapsed uterus? We replace it ourselves, and
if we can't make it stay, we put the animal down. Impossibly large lamb
or a cervix that won't dilate? A caesarean is far too costly. Better, as
one vet advised me, to shoot the ewe and attempt to extract the lamb
alive afterwards. (It worked.)
The same applies to cattle, though there is of course more room to spend
money and still come out okay. Or, at least there was prior to the
collapse of the calf market last fall. More and more, farmers are
treating ailments that they would formerly have taken to a vet. If their
treatments fail, the cheapest alternative may be to put the animal down.
The problem is not with the rates rural veterinarians charge. They work
long hard hours and few make their fortune and retire early. The problem
is that the value of livestock has failed drastically to keep up with
the cost of living, or any other cost.
As I said earlier, no farmer wants to work outside his comfort zone with
animals. Nor does he want to put down an animal because routine
procedures are too costly to contemplate. Yet, there is no readily
discernible solution to this dilemma. Livestock prices will never move
in lock step with the cost of human labour or other inputs. The history
of modern agriculture is that prices for farm commodities have steadily
declined, relative to all other costs. Present government policies and
market trends don't appear likely to change that.
A partial solution to this sorry situation would be for governments to
financially assist rural vet clinics. If they could afford to lower
rates, farmers could afford to use them more. This would likely yield
greater returns to farmers and their communities than many of the
"value-added" schemes that garner government support. It should also
make the animal welfare folks happy. And it would keep life for lambs
like mine from being a real bummer.
Honorary Life Membership
Well, bragging is always a bit pathetic, especially for a guy who's
passed the half-century mark, but I am going to run the risk that you my
readers will heap silent scorn on me for indulging myself. (Remember, I
said silent.)
Here goes.
At the annual meeting of the Saskatchewan Institute of Agrologists last
week I was awarded an honorary life membership. The Institute usually
awards a couple of these per year. This year, I was the only one. I am
pretty flattered by this, despite the fact that I think there was a
collosal mistake and there must be some other Paul Beingessner around
who deserved the honor. (Actually, there is another Paul Beingessner,
but he lives in Ontario so I suspect he is not the intended one.)
I know little about the SIA, except that a lot of the folks I know who
work in the agriculture field are agrologists, as they have to be by the
law that set up the SIA, but a lot of the folks on the list of honorary
life members are folks I know, or knew, and have a lot of respect for.
Anyway, if you want to see the list, google the SIA. It's a simple
website.
Thanks to Richard Marleau, who I met for the first time at the banquet,
but who is on my email list. for putting my name forward. Richard seems
like a very nice man, but apparently he is living proof of P T Barnum's
dictum that you can fool some of the people all of the time.
Regards
Paul Beingessner
passed the half-century mark, but I am going to run the risk that you my
readers will heap silent scorn on me for indulging myself. (Remember, I
said silent.)
Here goes.
At the annual meeting of the Saskatchewan Institute of Agrologists last
week I was awarded an honorary life membership. The Institute usually
awards a couple of these per year. This year, I was the only one. I am
pretty flattered by this, despite the fact that I think there was a
collosal mistake and there must be some other Paul Beingessner around
who deserved the honor. (Actually, there is another Paul Beingessner,
but he lives in Ontario so I suspect he is not the intended one.)
I know little about the SIA, except that a lot of the folks I know who
work in the agriculture field are agrologists, as they have to be by the
law that set up the SIA, but a lot of the folks on the list of honorary
life members are folks I know, or knew, and have a lot of respect for.
Anyway, if you want to see the list, google the SIA. It's a simple
website.
Thanks to Richard Marleau, who I met for the first time at the banquet,
but who is on my email list. for putting my name forward. Richard seems
like a very nice man, but apparently he is living proof of P T Barnum's
dictum that you can fool some of the people all of the time.
Regards
Paul Beingessner
Farmers Pay Hefty Price for Guessing Wrong 31/03/08
Column # 664 Farmers Pay Hefty Price for Guessing Wrong 31/03/08
The end-of-March Pool Return Outlook from the CWB for wheat, durum and
barley is largely unchanged from the PRO in February. This means the CWB
has increasing confidence in these numbers and they are unlikely to
change substantially this crop year. In fact, the CWB has asked the
federal government to allow an increase to initial payments of some $50
per tonne for spring wheat and $80 for durum.
This will make 1 CWRS with 13.5 per cent protein, loaded in a producer
car in my home town of Truax, worth $7.56 net per bushel initially with
potential for that to rise to $9.27 a bushel if the PRO is realized. The
value of durum wheat is even more substantial. Number 1 CWAD 14.5 will
bring $12.09 a bushel initially, with potential for $13.36 by the time
the pool is finished.
However, not all western Canadian farmers shipping these grains will
realize these high values. Some who chose to sign up with the CWB's
Fixed Price Contracts (FPC) will pay a hefty price for trying to
outguess the market for red spring wheat.
In response to farmer pressure to be able to lock in prices early in the
crop year, and because of legislative change in 1998, the CWB began to
offer a variety of contracting options to farmers. One of these is the
Fixed Price Contract (FPC). Under this, farmers are able to lock in a
price prior to, and early in the crop year. Before this crop year
began, the FPC looked better than the PRO that was predicted for the
upcoming year. For example, the PRO on July 13, 2007 for 1 CWRS 13.5 was
at $228, while the FPC was at $245.46. Farmers who locked in that day
would be expecting a substantial return over the price obtained by
farmers who stayed in the pool.
Of course, what followed was a steady and remarkable upturn in grain
prices. The average FPC for the crop year was taken at $244.83 per tonne
for 1 CWRS 13.5. The current PRO is $388 per tonne, meaning the average
producer who signed a FPC has left $143 a tonne on the table. Since 3.5
million tonnes were signed up under the FPC, farmers have left an
astonishing $501 million on the table, compared to what they would have
received if they stayed in the pool.
Nor is this phenomenon unique to CWB grains. A farmer here recently
complained to me that by pricing his lentils early in the crop year, he
had foregone some $50,000 compared to today's prices.
Farmers in this position in Canada have much company in the U.S. The
average elevator bid in North Dakota for wheat equivalent to 1 CWRS 13.5
been $9.69 a bushel, but the average price actually received by farmers
in North Dakota to date has been $6.50 a bushel. Obviously, farmers
there also jumped into the market early when prices looked good compared
to last year's.
There are two points of interest here. Since the CWB developed this
option, farmers have sometimes done better with FPCs than those who
stayed in the pool. However, there is no doubt they guessed badly this
year. American farmers were no more astute. The other point is that
farmers who are now screaming about the current CWB prices for wheat and
durum, compared with U.S. elevator prices, are being particularly
cynical. Recently, a handful of anti-CWB farmers are arguing that the
CWB has failed farmers since the PRO is not equal to American spot
prices for today. Unless they are especially naïve, these farmers have
to know that such prices are offered only because there is virtually no
grain left on American farms. As I said earlier, the average North
Dakota farmer got $6.50 a bushel for his red wheat, not $20. He can only
wish he was in the enviable position of farmers in the CWB pool right
now.
Farmers with FPCs need to understand that, just as in the open market,
they must deliver their entire contracts to the CWB. They cannot be
short on tonnage or they will have to buy out their contracts. Since the
CWB sells futures contracts to hedge the FPCs, it must purchase them
back if farmers default on delivery to the contract. Farmers will be
billed for that buyout, which is based on the difference between futures
prices at the time of sign-up compared to futures prices on the day of
the buyout. The CWB has no choice but to hold farmers to these
contracts. As is the case for open market grains, farmers are obliged to
fill their contracts, and the mechanism the CWB uses to deal with
default is essentially the same as grain companies use with open market
contracts.
Buyouts can be extremely expensive. Currently they are running as high
as $200 per tonne, so if a farmer has signed up 100 tonnes but delivers
95, he could be on the hook for $1,000.
Another issue facing some farmers is that when they deliver to an
elevator they will receive the initial CWB price. The elevator does not
know the value of the farmer's FPC. If the initial is higher than the
FPC, like it is now, the farmer will then receive a bill from the CWB
for the difference. Currently, there are hundreds of thousands of tonnes
of grain in this position. Farmers should understand why this is
happening.
Lastly, price pooling has been getting a bad rap in some quarters. There
is no doubt that in a falling market, it can be profitable to take a
FPC. In a rising market, it is not such a good idea. How good are you at
guessing which type of year it will be? This year, farmers in the U.S.
and Canada have guessed wrong and the consequences are huge. Price
pooling looks like a pretty good deal after all.
The end-of-March Pool Return Outlook from the CWB for wheat, durum and
barley is largely unchanged from the PRO in February. This means the CWB
has increasing confidence in these numbers and they are unlikely to
change substantially this crop year. In fact, the CWB has asked the
federal government to allow an increase to initial payments of some $50
per tonne for spring wheat and $80 for durum.
This will make 1 CWRS with 13.5 per cent protein, loaded in a producer
car in my home town of Truax, worth $7.56 net per bushel initially with
potential for that to rise to $9.27 a bushel if the PRO is realized. The
value of durum wheat is even more substantial. Number 1 CWAD 14.5 will
bring $12.09 a bushel initially, with potential for $13.36 by the time
the pool is finished.
However, not all western Canadian farmers shipping these grains will
realize these high values. Some who chose to sign up with the CWB's
Fixed Price Contracts (FPC) will pay a hefty price for trying to
outguess the market for red spring wheat.
In response to farmer pressure to be able to lock in prices early in the
crop year, and because of legislative change in 1998, the CWB began to
offer a variety of contracting options to farmers. One of these is the
Fixed Price Contract (FPC). Under this, farmers are able to lock in a
price prior to, and early in the crop year. Before this crop year
began, the FPC looked better than the PRO that was predicted for the
upcoming year. For example, the PRO on July 13, 2007 for 1 CWRS 13.5 was
at $228, while the FPC was at $245.46. Farmers who locked in that day
would be expecting a substantial return over the price obtained by
farmers who stayed in the pool.
Of course, what followed was a steady and remarkable upturn in grain
prices. The average FPC for the crop year was taken at $244.83 per tonne
for 1 CWRS 13.5. The current PRO is $388 per tonne, meaning the average
producer who signed a FPC has left $143 a tonne on the table. Since 3.5
million tonnes were signed up under the FPC, farmers have left an
astonishing $501 million on the table, compared to what they would have
received if they stayed in the pool.
Nor is this phenomenon unique to CWB grains. A farmer here recently
complained to me that by pricing his lentils early in the crop year, he
had foregone some $50,000 compared to today's prices.
Farmers in this position in Canada have much company in the U.S. The
average elevator bid in North Dakota for wheat equivalent to 1 CWRS 13.5
been $9.69 a bushel, but the average price actually received by farmers
in North Dakota to date has been $6.50 a bushel. Obviously, farmers
there also jumped into the market early when prices looked good compared
to last year's.
There are two points of interest here. Since the CWB developed this
option, farmers have sometimes done better with FPCs than those who
stayed in the pool. However, there is no doubt they guessed badly this
year. American farmers were no more astute. The other point is that
farmers who are now screaming about the current CWB prices for wheat and
durum, compared with U.S. elevator prices, are being particularly
cynical. Recently, a handful of anti-CWB farmers are arguing that the
CWB has failed farmers since the PRO is not equal to American spot
prices for today. Unless they are especially naïve, these farmers have
to know that such prices are offered only because there is virtually no
grain left on American farms. As I said earlier, the average North
Dakota farmer got $6.50 a bushel for his red wheat, not $20. He can only
wish he was in the enviable position of farmers in the CWB pool right
now.
Farmers with FPCs need to understand that, just as in the open market,
they must deliver their entire contracts to the CWB. They cannot be
short on tonnage or they will have to buy out their contracts. Since the
CWB sells futures contracts to hedge the FPCs, it must purchase them
back if farmers default on delivery to the contract. Farmers will be
billed for that buyout, which is based on the difference between futures
prices at the time of sign-up compared to futures prices on the day of
the buyout. The CWB has no choice but to hold farmers to these
contracts. As is the case for open market grains, farmers are obliged to
fill their contracts, and the mechanism the CWB uses to deal with
default is essentially the same as grain companies use with open market
contracts.
Buyouts can be extremely expensive. Currently they are running as high
as $200 per tonne, so if a farmer has signed up 100 tonnes but delivers
95, he could be on the hook for $1,000.
Another issue facing some farmers is that when they deliver to an
elevator they will receive the initial CWB price. The elevator does not
know the value of the farmer's FPC. If the initial is higher than the
FPC, like it is now, the farmer will then receive a bill from the CWB
for the difference. Currently, there are hundreds of thousands of tonnes
of grain in this position. Farmers should understand why this is
happening.
Lastly, price pooling has been getting a bad rap in some quarters. There
is no doubt that in a falling market, it can be profitable to take a
FPC. In a rising market, it is not such a good idea. How good are you at
guessing which type of year it will be? This year, farmers in the U.S.
and Canada have guessed wrong and the consequences are huge. Price
pooling looks like a pretty good deal after all.
Government Scolding Not Too Effective
Column # 663 Government Scolding Not Too Effective 24/03/08
Farmers are generally pretty happy about the price of grain these days.
The exception would be livestock farmers who are acutely aware at the
moment that one person's meat is another's poison. Whatever their mental
state, farmers are universally concerned that the price boom for grains
will largely be snatched away by input suppliers. Even the House of
Commons Standing Committee on Agriculture seems mildly concerned.
Members of that committee gave a browbeating to some input manufacturers
a couple weeks back, which is usually about how far such things are
taken by the House. Politicians seem to think a good scolding will do
the trick of getting these folks to act reasonably. Fertilizer suppliers
around here must have thick skins, because it hasn't worked on them so
far.
If the government really wanted to improve things for farmers, there is
lots it could do, and a few things it should think hard about not doing.
Agriculture Minister Gerry Ritz's obsession with getting rid of Kernal
Visual Distinguisability (KVD) is one of the latter. I would agree that
KVD should be eventually eliminated. It does indeed have some impact on
the ability to improve wheat varieties. The grain industry collectively
was on target to do this before Ritz cracked open Pandora's box by
announcing it would be gone by the start of the new crop year.
Even Ritz's advisors at Agriculture Canada were against the hasty
agenda, telling the Minister that the industry is not ready for this and
it might affect our ability to convince our customers they are receiving
their customary quality. One rumor I've heard is that grain companies
have been mumbling about raising their elevation fees by $4 a tonne to
manage the risk that will come with the end of KVD. I will admit that
single-mindedness can sometimes be a virtue. In the case of the
Agriculture Minister, it looks more like stubborn foolishness.
Nor will ending KVD bring immediate rewards. It takes years to bring new
varieties to market, and a firm date of 2010, as the industry was
proposing, would have allowed two things to happen. It would have given
plant breeders the go-ahead signal to move these varieties and research
forward, and it would have given the industry a deadline to meet to deal
with the effects of the move. In this case, the Minister should have
taken his own mantra to heart - "Lead, follow or get out of the way" -
and gotten out of the way. If farmers face financial repercussions
because of this move, years before they see any benefits, they'll know
whom to thank.
In the realm of doing something that would truly benefit farmers, the
government should consider taking some firm action on the transportation
issue. Grain shippers have been especially concerned with the railways'
performance. For example, on average for 2007, the railways provided
only 52 per cent of the rail cars ordered by the CWB when required,
compared to 83 per cent in 1999. That is a 31-per-cent service decline
over the last eight years.
The government stated its intention to conduct a review of rail service
when Bill C8 passed the House. Since this has happened, we can only wait
for the Minister of Transport to give us details on the review. Farm
groups are pressing for the government to also conduct a full costing
review for the grain industry. The last review was in 1992, and farmers
are now paying excessively for service that is mediocre at best. When
the Western Grain Transportation Act was passed, a contribution to fixed
costs equal to 20 percent of variable costs was deemed a suitable return
to the railways. Estimates show that this number has ballooned to over
50 percent.
A re-costing could save farmers many millions of dollars while
reflecting the real costs to the railways along with an adequate
contribution to fixed costs. The government could take this step, and
give the railways a scolding as well. That would satisfy political egos
while actually accomplishing something concrete. It would be a nice
change.
Farmers are generally pretty happy about the price of grain these days.
The exception would be livestock farmers who are acutely aware at the
moment that one person's meat is another's poison. Whatever their mental
state, farmers are universally concerned that the price boom for grains
will largely be snatched away by input suppliers. Even the House of
Commons Standing Committee on Agriculture seems mildly concerned.
Members of that committee gave a browbeating to some input manufacturers
a couple weeks back, which is usually about how far such things are
taken by the House. Politicians seem to think a good scolding will do
the trick of getting these folks to act reasonably. Fertilizer suppliers
around here must have thick skins, because it hasn't worked on them so
far.
If the government really wanted to improve things for farmers, there is
lots it could do, and a few things it should think hard about not doing.
Agriculture Minister Gerry Ritz's obsession with getting rid of Kernal
Visual Distinguisability (KVD) is one of the latter. I would agree that
KVD should be eventually eliminated. It does indeed have some impact on
the ability to improve wheat varieties. The grain industry collectively
was on target to do this before Ritz cracked open Pandora's box by
announcing it would be gone by the start of the new crop year.
Even Ritz's advisors at Agriculture Canada were against the hasty
agenda, telling the Minister that the industry is not ready for this and
it might affect our ability to convince our customers they are receiving
their customary quality. One rumor I've heard is that grain companies
have been mumbling about raising their elevation fees by $4 a tonne to
manage the risk that will come with the end of KVD. I will admit that
single-mindedness can sometimes be a virtue. In the case of the
Agriculture Minister, it looks more like stubborn foolishness.
Nor will ending KVD bring immediate rewards. It takes years to bring new
varieties to market, and a firm date of 2010, as the industry was
proposing, would have allowed two things to happen. It would have given
plant breeders the go-ahead signal to move these varieties and research
forward, and it would have given the industry a deadline to meet to deal
with the effects of the move. In this case, the Minister should have
taken his own mantra to heart - "Lead, follow or get out of the way" -
and gotten out of the way. If farmers face financial repercussions
because of this move, years before they see any benefits, they'll know
whom to thank.
In the realm of doing something that would truly benefit farmers, the
government should consider taking some firm action on the transportation
issue. Grain shippers have been especially concerned with the railways'
performance. For example, on average for 2007, the railways provided
only 52 per cent of the rail cars ordered by the CWB when required,
compared to 83 per cent in 1999. That is a 31-per-cent service decline
over the last eight years.
The government stated its intention to conduct a review of rail service
when Bill C8 passed the House. Since this has happened, we can only wait
for the Minister of Transport to give us details on the review. Farm
groups are pressing for the government to also conduct a full costing
review for the grain industry. The last review was in 1992, and farmers
are now paying excessively for service that is mediocre at best. When
the Western Grain Transportation Act was passed, a contribution to fixed
costs equal to 20 percent of variable costs was deemed a suitable return
to the railways. Estimates show that this number has ballooned to over
50 percent.
A re-costing could save farmers many millions of dollars while
reflecting the real costs to the railways along with an adequate
contribution to fixed costs. The government could take this step, and
give the railways a scolding as well. That would satisfy political egos
while actually accomplishing something concrete. It would be a nice
change.
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