In the world's farm trade, the playing field is uneven

by Brian Slemming

These two are talking about a coming crisis caused by the difference between subsidies paid to Ontario grain and oilseed growers and those paid to U.S. farmers. This difference guarantees Ontario growers will continue to face low commodity prices, while their U.S. counterparts will be sheltered from low world values.

So far the provincial and federal governments appear to have ignored the plight of their farmer constituents. Strange, when compared to governments' reaction to another group claiming to be victims of unequal subsidies. Canadian professional hockey teams are engaged in a major lobbying effort. Owners of teams willing to pay multi-million-dollar salaries to players claim they cannot stay in Canada because they receive smaller tax breaks and subsidies than U.S.- based teams. They call it an "uneven playing field", and many are threatening to pull up stakes and move south to the land of unlimited government support. It is a cry for help that appears to have found some sympathetic listeners among politicians. The federal government has promised to join provincial and municipal governments in providing some help. Queens Park has promised property tax concessions.

By comparison, it is interesting, many would say discouraging, to compare the reaction of governments to the Ontario growers who are also being asked to play on an "uneven playing field". But farmers differ in three important respects:

* they do not pay multi-million dollar salaries;
* they cannot pick up their acreage and move it elsewhere; and,
* they seem incapable of evoking any meaningful help from politicians.

The theoretical farm has a total of 500 acres: 200 acres corn, 100 acres wheat and 200 acres soybeans. This year (1999) the theoretical Ontario grower will receive total Government subsidies of Cdn$48.50 per acre. The theoretical U.S. grower will receive Cdn$90.51 per acre. (See table.)

A very significant difference, but wait, there's worse to come. Doidge's figures represent the situation as it was in August. In October of this year President Clinton signed an additional agricultural appropriation bill which added an extra Cdn$13 billion (U.S.$8.7 billion). That would bring the U.S. subsidy up to approximately Cdn$105.00 per acre. That's the difference, that's our farmers' uneven playing field.

It was not always so. In 1996 the level of subsidies received by growers on both sides of the border were roughly comparable. Canadian growers received $18.37 per acre against the U.S. growers' $21.44. But in the last three years the margin has exploded. Why?

"U.S. farm organizations certainly carry more clout than ours do," says Doidge. "They seem particularly adroit in getting the U.S. farmers' message across. The U.S. political system helps as well, the agriculture committee of the U.S. Congress is bipartisan, our government and opposition system makes for much more difficult lobbying." But Doidge points his finger at a greater problem Ontario growers face in trying to combat this "sheltering of U.S. growers". He says: "U.S. government policy is directed at keeping the market price of grains low while keeping the return to the grower high. It is a method of ensuring that grain exporters not only can compete on world markets, but they can win."

U.S. agri-business is engaged in a war. It is a war against the oil-seed producers of South America, specifically and most importantly Brazil. "Brazil is the second largest oil-seed producer in the world, and the largest exporter," says Colin Reesor. "The U.S. is determined to undercut them on the world market and take the number one position. It's that battle which is behind the attractive subsidy programs, but it won't work. Brazil will not be beaten. In the meantime our growers are innocent casualties in this war of giants."

Reesor also points out that the U.S. subsidy programs are so instituted as to add hidden benefits for producers. The three major programs available to U.S. cash- crop producers are:

1. PRODUCTION FLEXIBILITY CONTRACT (PFC)
Similar to our Market Revenue Program, and

2.-3. LOAN DEFICIENCY PAYMENT (LDP) & MARKETING LOAN GAIN (MLG)
These payments relate to grains and oil seeds involved in the nine-month storage program. Payments involve the differences between the daily Posted County buying rate, and the loan rate. Effective use of these programs demands attention to daily price movements. (See sidebar.)

These subsidy programs are subject to a maximum amount or "cap" established by the World Trade Organization (WTO). That body, which seeks to restrict unfair competition, set the maximum amount of subsidy the U.S. government could provide at U.S.$19.89 billion. With the latest allocation the U.S. has set a new record for subsidies, which have soared past the WTO cap to reach U.S.$22.5 billion!

That level of subsidy is responsible this year for a record gross income for U.S. farmers of U.S.$228.5 billion, and all this comes when commodity price levels are at a twenty year low. According to Doidge these figures beg the question, "is it better to farm the soil or the U.S. government?"

It remains to be seen what the WTO will say about this, but as Reesor points out, "The U.S. seems very good at getting their own way with the world regulatory body."

By comparison, Ontario farmers receive federal and provincial funding that is nowhere near the WTO allowable maximum of Cdn$4.48 billion. Exact figures for 1999 are not available but the total is expected to be around Cdn$2.8 billion. Ontario spent $75 million on "all subsidies, including crop insurance", says John Wehrstein, spokesman for provincial Agriculture Minister Ernie Hardemann.

Ontario programs are:

1. NET INCOME STABILIZATION ACT. (NISA)
Federal and provincial funds are matched to growers own contributions. The fund is not liquid and withdrawals must be triggered by individual growers.

2. MARKET REVENUE
A subsidy that pays growers two-thirds of 85% of the difference between the yearly average crop price compared to the average price for the past 15 years.

Bad as the comparison is, it could be worse. The Canadian government in its deficit-fighting zeal is anxious to remove the Market Revenue program. It was originally slated for removal last year, but a vigorous campaign kept it intact for "two one-year terms". The program still appears to be scheduled for cancellation. "I know of no change in position by the federal government," says Wehrstein. When asked what Ontario's position would be in the event of such a move, he said, "we would argue strongly on behalf of farmers." And after arguing ? "This government is keenly aware of the importance of agriculture and will not see the industry destroyed." A platitude worth remembering when a visit to your local banker is called for.

It is said that misery loves company. In this case Ontario growers' woes are shared by Western grain growers. Last October the Saskatchewan government ran a full-page advertisement in the national press complaining about unfair subsidies in the U.S. and in Europe.

The advertisement was followed by a meeting between the premiers of Saskatchewan and Manitoba and Prime Minister Chretien, who was quoted as saying, "it is not very realistic to think we can add much more money beyond the $1.5 billion we are spending this year." A government prepared to consider tax breaks to professional sports can spare nothing for the nation's food suppliers. This position by the federal government appeared to change a little in November when Agriculture Minister Lyle Vanclief announced an addition to the Agricultural Income Disaster Assistance program of $170 million to growers across the country. However, critics, chief among them Saskatchewan Premier Roy Romanow, claim this "new" assistance is merely a re-working of existing programs. Western growers claim that conditions are approaching those that prevailed during the Great Depression of the thirties, yet so far there have been very few similar claims of an emergency from Ontario growers. Why? "I don't think it has hit home to most growers yet," says reesor. "That will happen next spring. In the fall everybody is trying to wrap up harvest, but just wait. The crunch is coming."

When asked what a grower should do to combat this situation, Doidge said: "Unfortunately most of the world commodity prices are below the cost of production, so it doesn't matter what you grow. You won't get rich, in fact you won't pay your bills. Better make sure the Market Revenue program stays intact. It's a desperate scene, which isn't predicted to get any better because the heavy U.S. subsidies will keep world prices low." Doidge's final advice is, in its own way, the most telling comment: "Make sure you know your Visa number and your credit limit. This is called survival."

Minister Vanclief said last September, "We have to convince the United States and the European Union, the prime subsidizers, that over the long term farmers need - and want- to get a reasonable return in the market place and not from the mailbox." Only problem is, the long term may not get here quickly enough and our competitors to the south are farming their mailboxes with great effect.

U.S. Agricultural Subsidy Programs.

Marketing Loan Gain (MLG)
This applies to crops entered in the nine-month loan program, a system whereby crops are kept off the market for a nine-month period to avoid a glut, thence forcing prices down. Growers entered in the program receive payments through the MLG.

Loan Deficiency Payment (LDP)
This program provides similar benefits to the MLG, but it is directed at growers who choose not to enter the nine-month loan program. Both these programs allow the grower an opportunity to increase payments by playing the market.

In both LDP and MLG programs growers may opt to sell their crops at any time. The subsidy will be based on the previous day's local elevator closing price. In effect, it means that if a grower sees his elevator soybean closing price is $5.15 per bushel and the next day the Chicago price for beans jumps to $5.40, he can sell at $5.40, but his subsidy will be based on the previous closing price of $5.15, a clear windfall gain of 25c.

Battle Lines Are Drawn Up
Over Mandatory GMO Labels

By DON STONEMAN

The Christian Farmers Federation of Ontario (CFFO) is squarely behind mandatory labelling for food products that contain genetically modified organisms. Executive director Elbert Vandonkersgoed says the CFFO believes biotechnology can help farmers produce better crops and mandatory labelling of food products is necessary. Then consumers can choose what they eat and develop enthusiasm for the new technology.

On the other side is the Ontario Corn Producers Association (OCPA). In a recent press release that doesn't name the CFFO, but is clearly aimed at that target, the OCPA charges that farm groups favouring mandatory labels are sitting down to a poker game where the other side has stacked the deck. Not only will mandatory labelling fail to soothe consumers, the OCPA says it may play into the hands of GMO opponents such as Greenpeace, the Sierra Club and the Council of Canadians. These groups, the OCPA says, espouse mandatory labels as a way of getting GMO products off the market.

The OCPA is part of a coalition that has rejected GMO labelling altogether. AgCare executive director Brenda Cassidy says, "We're very supportive of providing consumers with information regarding the food they eat, but believe there are better ways to provide it than through labelling."

The AgCare policy says, "Labels should be reserved for situations in which a food product is significantly different in nutritional composition or carries a known health risk, such as a potential allergenicity." It has been adopted by the Ontario Agricultural Commodity Council and the Ontario Federation of Agriculture.

Meanwhile, the Ottawa-based Canadian Federation of Agriculture (CFA), which represents many farm groups, has sought middle ground. This fall, just as the GMO question was really heating up, the CFA announced that it was seeking the development of standards to allow putting a voluntary labelling system into place. The CFA made this announcement jointly with the Canadian Council of Grocery Distributors, the Association of Independent Grocers, and the Canadian General Standards Board. CFA president Bob Friesen, a pig and turkey farmer from Wawanesa, Manitoba, says voluntary labels developed with the standards board can send a signal that there must be some way the consumer can become better informed. Friesen says there are already about three million hectares of genetically modified products grown across Canada and he

expects this will increase, if uncertainty about markets can be eased. He's worried about markets for the vast acreage devoted to biotech canola in Manitoba and Saskatchewan, areas already hit hard by poor prices.

"Our obligation is to ensure our producers are producing products that have a market," Friesen says. According to consumer research, people have a sense that there is an adequate regulatory system but they are unsure what is out there.

"People have to realize there is a regulatory system," Friesen says. "It has to function in such a way that motives can't be questioned.

"We are one hundred per cent confident that farmers are producing safe, high quality food. Consumers deserve an opportunity to make a choice. "

But what are they choosing? asks Gord Surgeoner, president of Ontario Agri-Food Technologies, an organization seeking to bring new technology to the provinces' farmers so they can compete with producers elsewhere. "People think it is simple," Surgeoner says, " but it isn't."

He points out that agriculture has been modifying all of its crops and animal systems for hundreds of years. All apples are genetically modified because fruit-bearing branches were grafted on a different rootstock, but they weren't transgenic. Labelling transgenic products is pretty obvious, he says, but do we label cattle treated with vaccines made with recombinant technology?

He says there are similar questions to be asked about new products such as the Flavor-Saver tomato, which was developed by "turning the (existing) gene a hundred and eighty degrees" and shutting off the tomato's predisposition to spoil.

Surgeoner says the same arguments can be made for French fries cooked in canola oil from which all protein, and therefore genes, have been extracted. He wonders why those French fries should be labelled as genetically modified products.

If a boatload of soybeans goes to Europe and there are two kernels of transgenic beans on board, is the whole load transgenic? His point is that "There's no such thing as zero." Even organic standards allow for pesticide residues. The official standards guarantee that the farmer didn't use pesticides for at least three years on the field where that crop was grown. They don't guarantee that there isn't a tiny herbicide residue in the produce.

Surgeoner sees labels as "a marketing scam to get consumers to buy my product". In his view, labelling thus becomes a useless exercise.

"Are we going to allow that kind of thing? Let's have labels with meaning and value. I would agree with that. Let's not create systems that have no bearing, no value and condemn other products." Surgeoner's thinking is science-based, but the CFFO's Vandonkersgoed argues that it misses the point. "We share the European view that consuming food isn't about science. It's about entertainment, enjoyment, feeling good. The consumer isn't fundamentally asking scientific questions. It's a marketing issue, not a science issue. We have to have consumers on our side."

AgCare's Cassidy says consumers who don't want to eat food with ingredients derived through biotechnology can eat Certified Organic foods.

Then bring on the business, says Janet Duncan of Almonte, an organic grower and a member of the Canadian Organic Advisory Board. But don't expect that a deal cut with the Canadian General Standards Board will soon bear fruit, she warns. The federal standards defining organic produce came into place only last spring, after nine years of work. The standards board demands consensus, which is hard to reach at times.

Part of the reason for the slow progress was that the organizations involved were not well funded and the work was done by volunteers. But there are unavoidable factors too, such as the cost and time required for translation into two languages. Organizations with more resources might do better, Duncan speculates.

In the meantime, until such standards come into place, the sparring will likely continue between organizations such as the CFFO and the corn producers.