AGRI Committee Report

THE GRAIN AND OILSEEDS SECTOR IN TRANSITION

A number of themes came to light in the initial meetings.  As a result of the Agreement on Agriculture that was signed as part of the Uruguay Round of multilateral trade talks in the mid-1990s, the grain sector throughout the world has entered in a transition phase.  The price distortion in the international marketplace, however, appears as a dominant factor of that transition period.  Representatives from the Ontario Corn Producers’ Association told the Standing Committee that grain farmers in Canada are efficient, but not so efficient that they can compete against the U.S. government.^[1]  Using OECD data, this was supported by the Grain Growers of Canada who stated that, following the Uruguay Round, “the expectation of declines in overall government support granted to our competitors has not materialized.” ^[2]

In Western Canada, the elimination of the Crow’s Nest rate marked, in a way, the end of an era when the production and export of wheat were the dominant activity.  Production decisions are now based more on market signals even though the market is at times distorted because of external factors.  Grain producers on the Prairies have taken up the challenge of diversification, as witnessed by growth in the production of specialty crops, an increase in livestock production and efforts to find new market opportunities for products with higher added value.  Unfortunately, this diversification is being seriously affected by the subsidies paid by other traditional grain-producing countries and the emergence of new producing countries that are very competitive and enjoy significant comparative advantages.  In fact, diversifying at a time when farm income is falling is not only more difficult, but also takes longer.

When they appeared before the Standing Committee, the Prairies’ Ministers of Agriculture highlighted that situation: “wheat and barley crops have not provided profitable price levels since 1997. In 1999, oilseeds [return] dropped 40%. While oilseeds [prices] have recovered slightly, they are still 20% to 25% below where they were several years ago. At the same time there is an increase in fertilizer and fuel costs and this means greater costs for farmers. The total operating cost is expected to increase 21%-27% and this on top of the impact of lower commodity prices.” ^[3]

In the Committee’s first few meetings with grain and oilseeds stakeholders, a number of topics arose frequently including how difficult it is to be competitive on an uneven playing field; the establishment of a transition program to help farmers retire; the development of a land set-aside program; the difficulties rural municipalities will face if too many grain and oilseeds producers cannot survive the current farm income crisis; and the concentration of production in an increasingly small number of farms.

Witnesses shared with Standing Committee members their vision of government actions that could help producers.  The proposed solutions include a stronger farm income safety net; an improved grain transportation system; a more flexible Canadian Wheat Board; the removal of the excise tax on farm fuel; and, the most crucial solution, the government must stand firm on its proposal to require other countries to eliminate all export subsidies and support that distort trade and production.