A leading American scholar came north bearing good news for Canadian farmers – expect a levelling of the farm-subsidy playing field and new opportunities to profitably feed a hungry planet.
The Canola Council of Canada brought Robert L. Thompson to its annual meeting here and the scholar from Johns Hopkins University delivered a hopeful message to delegates, including a prediction that Washington will soon have no choice to cut its massive farm subsidies.
“It seems pretty clear that direct payments are on their way out,” said Thompson, adding that “almost inevitably there is going to be some rationalization to reduce the redundancies” when the next farm bill is developed in 2012.
With a $1.5-trillion budget deficit and $14.2-trillion debt, Washington will simply no longer be willing to hand out $4 billion to $5 billion a year in subsidies at a time when U.S. farmers are enjoying record income, he said.
“(P)olitically there is no way they’re going to survive,” he said. “They’re going to be the first thing cut.”
Policy-makers are considering whole-farm revenue insurance to replace existing supports – which currently see direct payments overlap with counter-cyclical payments and loan deficiency payments, he said. There’s also federal disaster assistance and subsidized crop insurance.
“In fact, I keep telling American audiences they really need to come up and look at the various approaches you all have taken to revenue insurance (in Canada),” Thompson said. “You’ve been down a few blind alleys but you’ve backed out of them if they weren’t exactly right and tried something different and I hope the U.S. can learn from that experience.”
American farm groups argue food production is critical to national security and therefore subsidies are justified. Not so, according to Thompson, who said in an interview that agriculture is a relatively small part of the U.S. economy.
As well, two-thirds of American farm production is unsubsidized, he noted.
“It’s a very inequitable program that we have today with basically five commodities getting 93 per cent of the benefits,” he said. “So it’s not clear cut that this is such a winning program from the viewpoint of the country as a whole.”
Subsidy cuts could result in commodity groups competing for what few resources are left, Thompson said.
“In the past there has always been a threat of that, but in the end there has always been enough money on the table the commodity groups haven’t gone for each other’s jugular, but we may actually see that for the first time,” he said.
Ken Edie, a former Manitoba Pool Elevators vice-president, suggested the U.S. should reform its policies on ethanol production, too. It’s cheaper and more energy efficient for the U.S. to import ethanol from Brazil where it’s made from sugar cane instead of corn, Edie said.
Thompson agreed and noted the U.S. blenders’ tax credit is ending and the import tariff on ethanol will be removed. However, he acknowledged the biggest barrier to ethanol imports is American law requiring 14 billion gallons of renewable fuel be produced annually.
Thompson also predicted demand for food in developing nations is going to be key to the future profitability of farmers, and once again had hopeful news for Canadian producers.
The world will add the equivalent of two more Chinas in the next 40 years – or 2.6 billion people, he noted. But with its red-hot economy, one-third of China’s population have to get by on less than $2 a day while worldwide an estimated 1.4 billion people live on less than $1.25 a day.
Their battle for a better life is one that farmers in Canada should be watching, said Thompson, who has extensive experience in agriculture in developing countries, including a stint as director of rural development for the World Bank.
“This is the critical point – the number of people who move successfully from $1 to $2 (a day in earnings) up to about $10 per day is probably the single most important factor driving future demand for food as we look out through this century,” he said.
“That’s the challenge and the opportunity for efficient producers wherever they are in the world.”
Most of the population growth will be in south and southeast Asia and in sub- Saharan Africa, and “there’s no way” those regions can be self-sufficient in food, he said. And while there’s lots of uncultivated land on the planet, only 12 per cent more land can be brought into cultivation sustainability, he said.
“So this leads me to the inescapable conclusion that the only sustainable future is one in which we do something close to doubling the average productivity of the land that’s already in production because otherwise we will be creating significant environmental problems,” he said.
And it will have to be done in a harsher environment because of global climate change, he said.
“I think one of the great potential beneficiaries of global climate change may be Prairie agriculture because your soils up here are just as good as the U.S. corn belt soil,” he said. “The main thing you lack is precipitation.
“As I look at the global climate change analyses, I think Canada could end up being an even greater supplier of agricultural commodities to the international market than even heretofore.”
Thompson later said he’s optimistic the world’s farmers and researchers are up to the challenge of feeding the world in the next half-century.
“I see a bright future for efficient producers wherever they are in the world.” [email protected]